WASHINGTON - Companies that continue to heap lavish executive packages at their executives while rank and file employees take hefty pay cuts, may face severe tax penalties if some members of Congress get their way. According to a Jan. 25 article in the Wall Street Journal, the House plans to press for language that would block payment of new benefits to every manager covered by a troubled company's executive retirement plan. The Senate and the Bush administration, according to House and Senate staff members, believe the new rule should apply only to the company's highest-ranking executives, the publication reported. If a troubled company were to go ahead and fund its executive plans anyway, it would face stiff tax penalties. The pension-overhaul bill that contains the measure is expected to be sent to President Bush before mid-April when many companies are required to make contributions to their defined-benefit plans, according to the WSJ. Changes may be in order because many members of Congress think the proliferation of supplemental executive retirement plans has contributed to the trend of companies freezing or terminating defined-benefit pension plans, the article read. They reason that if executives have their own rules for setting aside money, they have less incentive to maintain nest eggs for their employees. "We've heard too many stories of top executives of bankrupt companies sticking workers with unfunded pensions while running off with millions of dollars of so-called nonqualified pension benefits," Senate Finance Committee Chairman Charles Grassley (R-Iowa) told the publication. Some pension trade groups and others have warned that imposing penalties in this area may backfire. It could prompt companies to not offer defined-benefit plans at all because it would not have to pay for any special plans for executives, the WSJ reported. -email@example.com
Congress Takes Steps to Put the Brakes on Lavish Executive Packages
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