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Bush administration presses Congress on pensions

By John Crawley

WASHINGTON, Nov 19 (Reuters) - The Bush administration boosted pressure on the Senate on Wednesday to not give a special break to airlines, auto makers and other industries with high employee pension liabilities.

With the congressional session winding down, senior members of the administration's economic team urged lawmakers to forego a proposal to temporarily ease a rule that requires corporations to accelerate their contributions to underfunded retirement accounts to reduce soaring deficits.

The proposal by Sen. Charles Grassley, an Iowa Republican, would help a number of brand-name corporations, including bankrupt United Airlines, ease short-term burdens on their traditional fixed pension plans.

In a letter to Senate Republican and Democratic leaders, Labor Secretary Elaine Chao, Treasury Secretary John Snow and Commerce Secretary Donald Evans said they support an effort in Congress to boost assets of defined benefit plans, like those at United, by allowing them in the near term to peg returns to investment grade bonds instead of more conservative 30-year Treasuries.

But they "strongly oppose" the plan backed by Grassley, other key lawmakers and businesses that would also impose a three-year moratorium on the accelerated payment rule. The administration officials said deferring balloon payments would prompt corporations to fund their plans less aggressively and could wind up worsening liabilities.

Chao, Snow and Evans also said weaker company retirement accounts would put more pressure on the already cash strapped quasi-government agency that insures corporate pensions, the Pension Benefit Guaranty Corp. Chao chairs the PBGC board, while Snow and Evans are directors.

But some employees disagree with the adminstration postion, saying that breaks being sought by airlines are essential to preserve employee benefits.

"These balloon payments can't be made. Everyone knows they cant be made but the pensions will be fine if we let the market recovery work," Duane Woerth, president of the Air Line Pilots Association said in an interview.

Woerth, whose union represents pilots at United and other network carriers with big pension problems, noted there is no better time for the payment moratorium to guarantee improvement in underfunded accounts as interest rates are up and markets have surged after a three-year moratorium.