After squabbling over the terms for weeks, the Senate passed legislation on Wednesday that will require U.S. firms that have defined benefit pensions to increase contributions to the Pension Benefit Guaranty Corp. and set aside more money for retirees, according to MarketWatch.com.

Pensions Benefit Guaranty Corp. has been warning U.S. firms and industries that pension plans are underfunded by $450 billion, $354 billion at large companies alone.

The bill also includes changes to defined contribution plans, like 401(k)s

"If you make a promise, you are responsible for your own promise," said Senate Finance Committee member Charles Grassley (R-Iowa), a sponsor of the legislation. "Unfortunately, there are a few bad apples who have abused loopholes to avoid funding pensions in a way that shows they are responsible for their own promises."

The plan would give firms seven years to make up the deficits.

It also allows for businesses to keep using a mix of investment-grade corporate bonds in pension liability calculations through the end of 2006.

According to a Dow Jones Newswire, the writers of the Senate bill have adjusted the measure to provide exemptions for current prohibitions governing pension fund managers.

With these amendments in place, pension fund managers are allowed to take part in block-trades, trades on electronic communications networks, and transactions on foreign exchanges.

The bill gives mangers a 14-day period to correct any "unknowing violations."

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