Earlier this month I asked the question Technical Corrections to the Pension Protection Act of 2006. Another bite of the apple? Would special interest groups be able to accomplish now what they couldn’t accomplish in the PPA? Right question, wrong bill. The just passed Iraq spending bill included a provision giving funding relief to American Airlines and Continental Airlines. (The bill also included a provision that increases the minimum wage by $2.10 a hour, the first increase in almost 10 years.)
The rationale was that airlines like American and Continental which are financially struggling were being treated unfairly compared to United Airlines and US Airways who received approval from the bankruptcy courts to terminate their pension plans.
The Iraq funding bill allows the airlines to assume an 8.25% rate of return on their investments over the next 10 years, instead of 6% required by the PPA. The White House estimated that airlines may reduce their pension contributions $2 billion over 10 years, spokesman Tony Fratto said.
Sen. John Cornyn, Republican Senator from Texas where both airlines are located, who supported the change was quoted as saying:
Passage of this provision will be of enormous benefit to the thousands of citizens who are depending on this nest egg when they retire.
We’ll see whether this will result in a smooth landing.