THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, October 28, 1995 TAG: 9510280351
SECTION: FRONT PAGE: A6 EDITION: FINAL
SOURCE: STAFF & WIRE REPORT
DATELINE: WASHINGTON LENGTH: Medium: 67 lines
Prodded by Democrats, the Senate overwhelmingly rejected a provision Friday that would have let corporations take billions of surplus funds out of pension plans.
The Clinton administration hailed the 94-5 vote dropping the provision from a massive budget-balancing bill as a sign Republicans were starting to respond to the public's fears.
``The polls are showing a steady deterioration of support for what the Republicans are proposing. . . . This reveals the Senate is beginning to listen,'' Labor Secretary Robert Reich said.
Other amendments added to the budget bill's tax provisions on 99-0 votes would expand the health insurance deduction for the self-employed and let working Social Security recipients keep more of what they earn.
The pension provision, according to congressional analysts, would have sparked an estimated $19 billion in withdrawals over six years. Its defenders said freeing the money would help the economy and that corporations would be required to leave an ample cushion of surplus dollars.
The administration, however, said the provision would tempt failing companies to loot their pension funds, endangering the retirement security of as many as 13 million Americans and posing a risk to the Pension Benefit Guaranty Corp., the federal agency backing the pension system.
``This is one cookie jar . . . that Republican hands aren't going to get into,'' Sen. Edward Kennedy, D-Mass., declared after the vote on the amendment, which he sponsored.
The provision would have permitted the withdrawal of pension funds to pay for other employee and retiree benefits. It would have raised $5 billion for the treasury over six years because corporations would have been obligated to pay corporate income tax on the withdrawals.
A provision in the House budget plan approved Thursday is broader, permitting an estimated $27 billion in withdrawals over five years, at any time, for any purpose. Senate scales back cuts in student loan system
For colleges and student groups, the Senate proposal was good news.
The Senate scaled back the amount of reductions in the student loan system from $10 billion to $4 billion. And it killed two of its most controversial proposals - a federal tax on colleges amounting to 1 percent of their loan volume and the elimination of the six-month interest-free grace period for borrowers. Currently, borrowers aren't charged interest the first six months after they leave school.
The House version, which would still cut $10 billion from the student loan program, does not include the college tax but calls for the elimination of the grace period. That, says the American Council on Education, would add $1,000 to the debt of an undergraduate borrowing the four-year maximum of $17,125
But David Merkowitz, spokesman for the council, the leading lobbying group for colleges, said, ``We're certainly in much better shape than we were.
``It's certainly good news,'' he said. ``It takes us most of the way toward where we want to be.'' Yet he added, ``Everything remains at risk, because once you get into negotiations with the White House and Congress, you never know what's going to happen.'' MEMO: This story was compiled from reports by The Associated Press and staff
writer Phil Walzer. by CNB