Contractors charging the federal government for pension contributions is not corporate welfare.

• Author: Manos, Karen L.
• Position: Viewpoint

In full election-year mode, news media have been awash in articles, blogs and reports urging Congress to stop the "corporate welfare" of reimbursing federal contractors' pension costs.

They are expressing alarm about a new government contract accounting regulation that may add billions of dollars to the near-term cost of weapon systems and other government contracts.

Citizens Against Government Waste published a report claiming, based on "limited data," that the cost for reimbursing private contractors for underfunded plans has been estimated at $36.7 billion over 10 years. A November 2011 editorial in The New York Times urged Congress to "stop reimbursing the costs of pensions and other retirement benefits at huge, and hugely profitable, defense contractors."

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Federal Times and Washington Technology ran stories under headlines proclaiming, "Pensions at Top 18 Contractors Cost Government $3.3B in 2010," "Agencies Stuck with Tab for Federal Contractor Pensions, Taxpayer Group Says," and "New Accounting Rule Could Cost DoD Billions." Even The Wall Street Journal's Market-Watch ran a story under the headline, "GM Reforms Pension Plan--Feds Should Do the Same."

While robust public debate is healthy, the underlying facts ought to be accurately stated.

The new government accounting regulation should come as no surprise. It was specifically required by the Pension Protection Act of 2006, Public Law 109-280, which became effective on Aug. 17, 2006.

Prompted by the terminations of several large, poorly-funded defined benefit pension programs and fears that future plan terminations could bankrupt the Pension Benefit Guaranty Corp., the Pension Protection Act was passed by large bipartisan majorities in both houses and requires employers to fund their pension plans more quickly than under prior law.

Indeed, the House minority's major criticism was that the legislation did not go far enough to protect the retirement security of more than 44 million workers, retirees and their families then participating in defined benefit pension plans.

The Pension Protection Act requires employers to fully fund their defined benefit pension plans over a shorter, seven-year period, and calculate the plan's assets and liabilities using actuarial assumptions and interest rates that are closer to market than previously required by the Employee Retirement Income Security Act of 1974,

The net effect is that while the total cost per employee should be...