Statements on Introduced Bills and Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

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By Mr. HARKIN:

S. 607. A bill to amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 with respect to early retirement benefits, and for other purposes; to the Committee on Health, Education, Labor, and Pensions.

Mr. HARKIN. Mr. President, I rise to introduce a bill that will prevent workers from losing a large chunk of their pension when they work for a company that sells their division.

This legislation is prompted by articles written by Mary Williams Walsh in the New York Times outlining the story of how a group of workers in Olean, NY lost $25 million in promised benefits when their division was acquired and then spun off.

Current law says that if a company wants to amend their pension plan, they have to give workers the share of their early retirement subsidy that they have already earned. However, a company doesn't have to do that if your division is bought and sold--even if the workers are in the same building, sitting at the same desk, and doing the same job the whole time. That's just ridiculous.

In this case, Halliburton purchased a division of Dresser Industries, and seventeen months later spun off the Olean, NY division, netting $215 million. They treated those employees as if they had resigned and gone to work for Ingersoll-Rand. While employees who were 55 years old were kept whole, anyone younger lost up to half the value of their pension overnight, without being informed. They realized what had happened in June 2002 when they got notices in the mail telling them that they had 90 days to either collect a much smaller benefit than they had anticipated, or lose their right to a lump sum payment forever. Some recent retirees were even told that they got paid too much, and had to give back pension money they already received.

Meanwhile, the CEO during that period, now Vice President DICK CHENEY, got a special pension deal from the board totaling an estimated $10 million in benefits, even though he hadn't worked there long enough to qualify for a pension under the usual rules.

This is a completely unconscionable way to cheat hard working people out of their promised pension benefits.

My will would simply require that companies must follow the same rules about applying credits toward pension under mergers and acquisitions that they do under any other kind of pension plan amendment.

By Mr. HARKIN:

S. 608. A bill to create an independent office in the Department of Labor to advocate on behalf of pension participants, and for other purposes; to the Committee on Health, Education, Labor, and Pensions.

Mr. HARKIN. Mr. President, I rise to reintroduce a bill originally introduced in the 106th Congress that seeks to create an Office of Pension Participant Advocacy at the Department of Labor.

When I first introduced this bill, it was just a good idea. Now, it has become an absolute necessity. Since 2000, unimaginable pension loss horror stories have cropped up in the wake of major corporate bankruptcies like Enron and WorldCom. People have lost their guaranteed pensions to mergers and acquisitions and to misinformation and to just plain irresponsibility.

On March 3, the New York Times reported that companies are still desperately seeking ways to scrape funds out of their pensions--despite market downfalls and despite the dire situation at the Pension Benefit Guarantee Corporation. And who ultimately ends up paying the price when the company ends up bailing on its obligation? Pension plan participants pay.

Many of these people have absolutely nowhere to turn. People who have a genuine legal claim to their pension, but have been unfairly denied it, can end up spending countless hours calling phone number after phone number and getting the run around, and maybe receiving technical assistance years later.

Individual pension plans are complex, as are the laws that govern them. Currently, multiple Federal agencies share jurisdiction over pension law. Time and time again, the needs of pension participants are ignored, and pensioners don't get help in navigating the government's pension bureaucracy.

This office would accelerate good public policy. Several years ago, I heard from an employee of a large technology manufacturer that gave early retirees the choice between taking either an annuity of $1,470 per month, or an annuity of $200 per month plus $107,300 as a lump sum, both payable at age 55. While the lump sum package may appear more lucrative at first glance, the annuity option for a given employee had a value of approximately $228,000--more than 80 percent greater than the lump sum option touted by the employer.

I also heard from a 53 year old man with 26 years of service. He shared with me the complicated summary of his pension options he received from his employer. The first line offers a $423,000 lump sum, which looks like it is based on the value of the $3,140 per month annuity he would normally receive. However, the true actuarial value of the annuity option turns out to be closer to $511,000. Stated another way, the $423,000 lump sum offer is equivalent to a monthly benefit of $2,590, almost $500 a month less than the annuity option would provide. People lost half the value of their pensions to this kind of misinformation, many of whom never found out how they had been hurt.

Hearing stories like that prompted me to write to the Treasury requesting that they close this loophole and require that employees get an apples-to-apples comparison of their benefits, and Treasury did. However, how many fewer people would have been given misleading information about their pensions if there were someone within the government specifically charged with seeking out problems like these?

In the years that I have been working to fight age discriminatory practices sometimes used when converting from traditional defined benefit plans to cash balance pensions, I heard from a number of people who lost huge amounts of money in their pensions to ``wear away,'' again, often not realizing what had happened to them until their nest egg was gone.

For example, take Larry Cutrone. He was one of thousands of people who figured out how much they lost in their cash balance conversion. He said that before AT&T converted his pension, it was valued at $350,000. After the conversion, in July 1997, the value dropped to $138,000. The calculation period for his pension was frozen at 1994-1996 salaries, so no value to his retirement account was added for any years he worked after the conversion.

He said:

In September 2001, I was ``downsized'' out of AT&T and decided to take my pension. I discovered that it translated into an annual income of just $23,444 instead of the $47,303 income under the old plan.

When these plans were changed over, workers were not informed that this could happen. They woke up one day and found out: they have less than 50 percent of what they thought they were going to get in their retirement.

Good public policy on pensions should never, ever have allowed that. People need someone on their side, because large corporations have plenty of people on their side.

This office would not only provide technical assistance to participants, but would serve as a voice to advocate for participants' rights in general within the Administration. Corporations who cheat employees out of their pensions should not be able to wait for a retiree to notice that they've been taken. There should be someone in the Federal government actively pursuing companies who use their employees' pension plans as their own private piggy bank.

The Office of Pension Participant Advocacy created in this bill would: actively seek out information and suggestions on pension policies and on Federal agencies which affect pension participants.

Evaluate the efforts of Federal agencies, businesses and industry to assist pension participants.

Identify significant problems faced by employees and retirees.

Make annual recommendations documenting significant pension problems and recommending legislative and regulatory solutions.

And examine existing pension plans and determine the extent to which current law serves pensioners in those plans.

We need one central place where pension participants can turn to when problems arise. We need one place in government whose sole obligation is to look out for the general pension interests of employees and retirees concerning their pensions. We need an office that will be an advocate for pension participants. For that reason, I urge my colleagues to join me in supporting this critical legislation.

http://thomas.loc.gov