WASHINGTON D.C. - Multi-employer pension plans like those used by building trades unions and their contractors are not nearly in the same sorry shape as many single-employer plans such as the one held by Northwest Airlines.

But both types of plans are in need of some major rules changes that will allow them to be more fiscally responsible and prosperous. That's the aim of HR 4 - the Pension Protection Act - which was adopted by the U.S. House on July 29. The legislation now goes to the Senate, where prospects for passage are good.

There is some dissatisfaction with the rule changes contained in the bill for single-employer plans. But both the AFL-CIO Building Trades Department and the Associated General Contractors of America like what they see with the multi-employer pension plan reforms.

"This bipartisan bill includes desperately needed reforms for multi-employer plans that were carefully negotiated by labor and employer groups," said Building Trades Department President Edward Sullivan. "(The bill) will help preserve the long-term viability of multi-employer plans, for current and future pensioners."

Said Associated General Contractors of America CEO Stephen E. Sandherr: "This is an important addition to retirement security for unionized labor in our industry."

The construction industry funds more than 40 percent of multi-employer plans nationwide. Under current rules, employers are bound by a contribution deductibility limit of 100 percent, which makes it difficult for them to create sufficient plan savings during slow work periods or when the stock market takes a dive.

The reforms in HR 4 would:

• Increase the deductibility limit to 140 percent of current liability, allowing plans to save more for future retirees and avoid future funding shortfalls.
• Require that plans improve their funded status in order to ensure that they are always fully funded. For plans whose funded percentage is less than 80 percent, trustees would be required to put together a schedule to improve their plan over a 10-year period, as well as notify plan participants.
• Establish new funding standards and restrictions in benefit increases for multi-employer plans that are funded at less than 65 percent.

The pension bill includes the authority for critical-status plans to protect normal retirement benefits by collecting extra contributions from employers on an emergency basis.

"It is imperative that workers have some assurance that the pensions they earned are there when they retire and that we keep our commitment to current retirees," Sullivan said. "This is a strong piece of legislation that is absolutely necessary…."

There's less enthusiasm for the reforms involving single-employer plans, which are the much greater target of the new rules. The federal government's primary concern is not getting stuck with the all or part of the current $23 billion deficit of the Pension Benefit Guarantee Corp. The PBGC backs up employer pension plan obligations - and with so many domestic airlines, steelmakers and automakers on the financial ropes, that deficit could balloon to more than $100 billion.

The new rules would give most single-employer plans seven years to fully fund their pension plans and require accelerated payments from funds that are severely under-funded. There are also new accounting features similar to those with multi-employer plans.

The pitfalls of the new single-employer rules is that they don't kick in until 2008. Even then, rules will be phased in, lowering the number of companies deemed at-risk of defaulting on pension obligations. Auto companies won an exemption allowing them some favorable leeway in how they determine their liabilities.

The new rules that give companies time to grow out of their financial difficulties are a balancing act between immediately imposing new rules that could send them into bankruptcy, or allow them time to increase their pension funding.

Stephen McMillin, deputy director of the White House Office of Management and Budget told The Wall Street Journal: "If you push some of these companies too hard too fast you're going to be pushing them into a situation where, instead of protecting the worker from the theoretical risk 10 or 20 years down the line, you've created actual harm to them in the first few years."