By Jim Abrams
The Associated Press

WASHINGTON - Lawmakers call it a perfect storm, a confluence of events that is forcing financially weak companies to pay billions of dollars more into pension plans and threatening the retirement security of millions of Americans.

So serious is the situation that business groups have joined with organized labor and Republicans have allied with Democrats behind a Senate bill to change the formula that determines pension contributions.

The measure also provides relief to airlines - such as Delta Air Lines, which has about 4,000 workers in Greater Cincinnati - and steel makers, including Middletown-based AK Steel, that are lagging in their pension payments.

The Bush administration has issued a veto threat over any bailouts to underfunded plans that would only worsen pension financial woes.

But the Senate brushed aside warnings of a veto Tuesday and advanced toward passage of the legislation.

The Senate moved a step closer toward passage, possibly today, to send the legislation into negotiations with the House.

The House acted on the measure late last year..

"We have a pension time bomb in this country," Senate Democratic leader Tom Daschle of South Dakota said.

Conditions contributing to the perfect storm include a weak job market, particularly in manufacturing, a slowly recovering stock market and historically low interest rates that have driven up what companies are required to pay annually into their pension plans.

Sen. Ted Kennedy, D-Mass., also a sponsor of the bill, said pensions are underfunded by $350 billion and that as many as 20 percent of defined benefit pension plans are at risk of being terminated or frozen.

The Pension Benefit Guaranty Corp., the federal agency that insures the pensions of 44 million Americans, saw its deficit expand to a record $11.2 billion at the end of last year.

The immediate problem is that companies have been forced to invest in their plans based on the rate of return they could expect from 30-year Treasury bonds, which the government stopped issuing in 2001. Plunging interest rates have meant sharply increased payments.

According to Watson Wyatt Worldwide, a consulting agency that studies employee benefits, Fortune 1000 companies saw their contributions rise from $11 billion in 1999 to $44 billion in 2002.

The government has made adjustments in the payment formula the past two years, but without legislation, companies will return to the 2001 rate scale this April.

AK Steel, which has lost about $1 billion over eight of the last nine quarters, faces an estimated pension payment of $200 million in 2005.The company has 32,000 pensioners and 10,000 active employees.

Delta has an estimated $450 million cash payment to make to its pension fund in 2004, with $300 million of that to be paid in the first quarter. In addition, Delta took a $1.1 billion noncash charge to its equity in fourth quarter 2003 due to its pension fund, and said last year that as of June 2002, it was $4.9 billion underfunded if all eligible employees were to retire at the same time.