Tweak in a Pension Rule Could Finance Roads and Student Loans Lawmakers looking for money to finance low-cost student loans and fix aging highways have found about $20 billion in an unlikely place: company pension funds. Pension funds are not exactly brimming over with extra money. In 2006, Congress was concerned enough about bolstering them to pass legislation closing loopholes and making companies set money aside more quickly. But the highway bill that Congress is rushing to complete by Friday contains a measure that would let companies slow their pension contributions again. Because the contributions are tax-deductible, permitting smaller contributions would mean that companies take fewer tax deductions - and as a result, create more federal revenue. The provision is expected to increase corporate income tax receipts by $9.4 billion over the next 10 years, according to calculations issued Thursday by the Joint Committee on Taxation. The effect is most powerful in the first years, then winds down, a Congressional staff member who worked on the measure said, to keep from giving companies funding relief in perpetuity. Another provision of the bill would raise the annual premiums that companies pay to the federal program that takes over failing pension plans when companies go bankrupt. Over the next 10 years, that will let lawmakers count another $9.5 billion toward the cost of highway improvements and low-cost student loans. Although the premiums are in fact supposed to finance the operations of the Pension Benefit Guaranty Corporation, the Congressional Budget Office counts them as general revenue for budgeting purposes. "It's really a stealth measure," said Jeremy Gold, an actuary and economist who has called attention to the gaps between the numbers that actuaries work with and the true economic cost of pension benefits. He said the bill could eliminate special safety features introduced in 2006 to keep the weakest pension funds from running through their money too quickly. But Congressional staff aides said there was a growing consensus that the 2006 rules were too harsh and needed to be softened. The measure would allow companies to calculate their pension contributions using a modified average of the interest rates that have prevailed over the last 25 years. The current statutory practice is to average interest rates over just two years. This seemingly small and technical change has a powerful effect on pension calculations, and, by extension, on tax revenue. A 25-year average rate would be around 7 percent, capturing the tail end of the 1980s, when interest rates were very high. Even with the modification that would let companies plug a higher rate into their pension calculations, making the plans look better funded and reducing the required contributions. Congress has been struggling for years to find a new source of money for roads and other infrastructure, because the main source, an 18.4-cents-a-gallon tax on gasoline, no longer covers the cost. The gas tax has not been changed since 1993, and as oil prices have spiked in recent years Americans have been switching to more fuel-efficient cars and driving less. Pressure has also mounted this year to find a way to keep the interest rate on Stafford loans from doubling on Sunday, when a five-year rate relief program is set to expire. The current rate, 3.4 percent, will rise to 6.8 percent without an extension, affecting more than seven million students who are expected to take out such loans for the next academic year. Lawmakers tussled over other sources of money, with Republicans and Democrats shooting down each other's proposals, until pensions came into focus, both as a possible revenue source and a much-needed piece of bipartisan common ground. Lawmakers of both parties are inclined to find ways to help companies operate their pension plans, as a way of enhancing retirement security. The 2006 pension rules were written to be phased in slowly, to give companies time to adjust, and after the financial debacle of 2008, Congress delayed the phase-in even more, to help companies conserve their cash. Even then, no one expected the Federal Reserve's policy of using low interest rates to stimulate the economy to still be in force. Low interest rates may help the economy overall, but they are a hardship for the companies that offer pensions to their workers. When interest rates are low, the funding rules call for companies to put more money into their pension plans, on the assumption that the money will compound more slowly. And this year, because the economy is still weak, companies with pension plans were back on Capitol Hill once again, asking for additional help. But this time they proposed a new way of calculating pension obligations, by adjusting the interest rates they use to calculate contributions. "Today's historically low rates are creating an artificial funding crisis for employers across the country," said Kenneth W. Porter, the former chief actuary of DuPont, at a hearing in February of a subcommittee of the House committee on education and the work force. Why should obligations due over 50 years be calculated on interest rate movements that may be aberrational or attributable to government economic policy? Mr. Porter, who now has his own consulting firm, urged lawmakers to reduce the effect of low rates by permitting companies to average interest rates over 25 years instead of two. The proposal set off a ruckus in the world of pension actuaries, because it came at a time of rising concern that certain actuarial methods are producing numbers so distorted they are misleading. The board that writes accounting rules for states and cities just completed a grueling five-year project on the issue, seeking to produce more credible numbers. The interest rate it chose was entirely different from what another board, which issues actuarial rules, has called for. The Securities and Exchange Commission has been sending officials to speak at pension conferences, issuing warnings against "cherry-picking" assumptions, like interest rates. No one in any of these organizations has recommended averaging interest rates over 25 years. Donald E. Fuerst, a pension expert at the American Academy of Actuaries, sent an unusual letter to the lawmakers in May, advising against it. Pension values based on a 25-year average rate "are insufficient," he wrote, "and do not provide meaningful information about the current funded status of the plan." Congressional staff members said they were surprised that the academy took the stand it did. A decision was made in the House to reduce any risk to the pension system by requiring bigger contributions to the Pension Benefit Guaranty Corporation, which is supposed to finance its own operations, but has a deficit in most years.