[JURIST] President Bush on Thursday signed into law the Pension Protection Act of 2006 [HR 4 materials; AP summary], which he called the "most sweeping reform" of US pension law since the enactment of the Employee Retirement Income Security Act (ERISA) [text] in 1974. The bill, passed by the Senate in August and by the House of Representatives [JURIST reports] in July, is intended to encourage employers to adequately fund pensions so that promised pensions will still be available when workers retire. Its supporters say it will preserve the workability of traditional employer-employee pension benefits packages while at the same time opening new savings options and reducing the likelihood of government bailouts. Opponents say the measure gives companies too much authority to terminate pension plans and that it unfairly eases the obligations of the airline industry. The new law allows bankrupt airlines with frozen pension plans to claim the pensions are financially sound despite large liabilities, giving the airlines an additional ten years beyond the seven years allotted to most companies to fully fund their pensions.

After signing the bill [press release], Bush said:

The Pension Protection Act of 2006 will help shore up our pension insurance system in several key ways. It requires companies who underfund their pension plans to pay additional premiums. It extends the requirement that companies that terminate their pensions must provide extra funding for the system. This legislation insists that companies measure their obligations of their pension plans more accurately. It closes loopholes that allow underfunded plans to skip pension payments. It raises caps on the amount that employers can put into their pension plans so they can add more money during good times and build up a cushion that can keep pensions solvent in lean times.

Finally, this legislation prevents companies with underfunded pension plans from digging the hole deeper by promising extra benefits to their workers without paying for those promises up front. The problem of underfunded pensions will not be eliminated overnight. This bill establishes sound standards for pension funding, yet, in the end, the primary responsibility rests with employers to fund the pension promises as soon as they can.