Last week The Wall Street Journal described "pension smoothing" as "a government accounting maneuver to pay for road repairs, subways and buses" by allowing "many U.S. businesses to delay billions of dollars in pension contributions for retirees."
Uh-oh. The term "government accounting maneuver" always sounds ominous.
So does the phrase "delay billions of dollars in pension contributions for retirees."
But the $10.8 billion transportation bill, which passed by ample margins in the House (272-150) and Senate (81-13) and signed by President Barack Obama two weeks ago, authorized pension smoothing.
Because companies' pension contributions are tax deductible, postponing them under the new legislation slightly raises their tax payments. The extra revenue helps replenish the Federal Highway Trust Fund and pay for overdue infrastructure projects.
But at what cost to the long-term reliability of those private pension funds that have federal guarantees?
John Ehrhardt, an actuary at the Seattle-based consulting firm Milliman, told the Journal that U.S. companies with 100 of the nation's biggest pensions are projected to contribute $44 billion to their plans this year. Yet after "pension smoothing" takes effect, he forecasts those contributions will fall by 30 percent (to less than $31 billion) next year.
Brad Belt, former executive director of the Pension Benefit Guaranty Corporation, warned in the same story:
"To use the federal pension insurance program to pay for wholly unrelated spending initiatives is just bad public policy. It has adverse implications for the funding of corporate pension plans."
And 1st District Congressman Mark Sanford, in a guest column on last Thursday's Commentary page, aptly pegged pension smoothing as "a budget gimmick" that "hypothetically creates more money for government."
Rep. Sanford added: "The problem is those companies have to pay it back later, and in the meantime the government is on the hook if they come up short."
In other words, this is your problem, too.
Meanwhile, Leonard Burman, a Syracuse University economics professor, offered this incriminating analogy on forbes.com: "Congress is basically allowing companies to do what our current legislators do - postpone funding their financial obligations."
This seems an especially ill-advised time to lower the bar on businesses' pension payments. After all, according to the Journal, the nation's largest corporate pension plans have already soared to $252 billion this year.
Some powerful folks inside the Beltway and corporate boardrooms evidently consider this "government accounting maneuver" a smooth move.
Unfortunately, though, recent history shows that underfunded pension programs frequently make rough - and costly - landings.