Nomination of John W. Snow

NOMINATION OF JOHN W. SNOW

Mr. HARKIN. Mr. President, I thank my friend and colleague from across the Mississippi River in Illinois, Senator Durbin, for the very kind and overly generous words. More than that, I thank him for his diligence and for his hard work on this issue which means so much to the average working person in America.

I will just say at the outset that Senator Durbin has, I believe, correctly laid out the meeting we had with Mr. Snow earlier this evening, and has also correctly portrayed the assurances we got from Mr. Snow regarding this issue and how he would approach it as the new Secretary of the Treasury.

Again, I want to make it clear that the actions of this Senator earlier today and yesterday in wanting to have a bit of time here to talk about this before we voted on this nomination had nothing to do with Mr. Snow. I said that earlier this evening. This is nothing personal at all. He has a very distinguished career in the business community. He was head of the CSX Railroad, I guess for well over 20-some years, if I am not mistaken, and has served well on boards of schools, universities, John Hopkins, and others. In other words, he has been both a business leader and a community leader.

Again, I want to compliment him and commend him for his distinguished career and for his service both to his company and to our country.

I congratulate Mr. Snow on his nomination for Secretary of the Treasury and will join with my colleagues in supporting that nomination.

I feel, as Senator Durbin said, that he gave us assurances on this issue—and I will talk more about this issue in a minute—dealing with pensions and workers' rights; that he will assure the fairness and equity as the rule. In fact, I wrote down exactly what Mr. Snow said. He said:

I BELIEVE WE SHOULD PROTECT THE BASIC RIGHTS OF WORKERS. AND, IF A RULE DOESN'T MEET THAT TEST, IT WON'T MOVE FORWARD. FUNDAMENTAL FAIRNESS WILL BE AT THE CENTER OF ANY POLICY.

I compliment Mr. Snow for that. As Senator Durbin pointed out, as the CEO of the CSX Railroad, when they changed their plan over from a defined-benefit plan to a cash-balance plan, they left in place for older workers the defined-benefit plan. In other words, they could stay with that plan. Newer, younger workers could go with cash balance plans. To me, that really makes sense. That is really the way we ought to be going in this country when we talk about our pensions and protecting our pensions.

So my actions here yesterday and today have not been about Mr. Snow. They have been about this issue. It is an issue of fundamental fairness for people who work hard, play by the rules, and then find out—after working 20 or 30 years—that what they thought they were going to get has been taken away. So that is what this is about.

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Over the last several days, I have been reading a book that was given to me last year. I had not gotten to it. I have now been reading it. I am almost finished with it. I recommend it highly. It is a book by Kevin Phillips called "Wealth and Democracy."

I remember in one part of the book he pointed out that over the last 30 years—I think from 1970 to about the year 2000—the difference in the compensation for our CEOs and the people who work on the shop floor, so to speak, has been that in 1972, the average CEO salary was about 42 times that of the average worker in that corporation. That was 1970—42 times; by the year 2000, that gap had widened to 417 times. In other words, today, the average CEO is getting 417 times the compensation of the average worker in that corporation. So that gap has widened tremendously.

Also what has happened is that we see, time and time and time again, that when CEOs of these large corporations hit a rough spot—the company maybe has a rough spot, the CEOs leave the corporation—they get wonderful golden parachutes. They get wonderful retirement programs. We have to have that same kind of fairness for the average workers.

In 2001, we passed numerous pension provisions that had wide support. Many provisions favored those making more than $200,000 a year. I am not saying those provisions are bad, but we need some balance.

In the early 1990s, U.S. companies began a process of switching from defined benefit pension plans to cash balance plans. I am not going to get into the esoteric descriptions of defined benefits plans and cash balance plans, but only to say that many workers who affected by these changes had no idea what was happening to their pensions.

You might ask: Why has this all of a sudden come to the forefront in the year 2003? Well, it did not. I first drafted legislation in 1999, because by that time workers whose pensions had been changed in the early and mid-1990s, and who were now really facing retirement, all of a sudden woke up and found out that they did not have what they thought they would, and they had no recourse.

So, in 1999, I introduced a bill to make it illegal for corporations wear away the benefits of older workers during cash balance conversions. We had a vote on that bill in the Senate. I offered it as an amendment to the reconciliation bill, and a point of order was raised, so we had to vote to waive the point of order. 48 Senators, including 3 Republicans, voted to waive the budget point of order so we could consider this amendment. Obviously, we did not have enough votes.

After that, more and more stories came out about how many workers were losing their pensions. In April of 2000, I offered a sense-of-the-Senate resolution to stop this practice, and it passed the Senate unanimously. The Secretary of the Treasury put a moratorium on conversions from defined benefit plans to a cash balance plans. That moratorium has been in effect now for over three years.

Last month, a rule was proposed by the Treasury Department—a rule that would turn the clock back, undo the moratorium, and allow companies to once again engage in the practice of switching from defined benefit plans to cash balance plans and wear away the benefits of older workers.

So that is why I wanted to utilize this time and this nomination of Mr. Snow to be Secretary of the Treasury, to raise this issue once again and to talk with Mr. Snow about it as the incoming Secretary of the Treasury. We cannot permit this rule to just go forward. I think it was clear here in the Senate, in 2000, that we did not want that practice to continue. So I wanted to take this time to bring this issue to the forefront.

What are we talking about when we talk about how much people are losing in this? This morning, we had a press conference. We had a man there by the name of Larry Cutrone. He was one of thousands robbed of the full value of their earned pensions. 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.

So 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.

Is that fair? Is that equitable?

Mr. President, I ask unanimous consent that this statement of Larry Cutrone that he gave this morning be printed in its entirety in the RECORD.

Mr. HARKIN. Mr. President, 189 Members of the House of Representatives and 25 Senators signed a letter that was sent today to President Bush, asking that we do not reopen the floodgates, that we withdraw this rule and promulgate a rule that is fair and equitable. As we said in our letter:

WE ARE WRITING TO STRONGLY URGE YOU TO WITHDRAW PROPOSED TREASURY DEPARTMENT REGULATIONS REGARDING CASH BALANCE PENSION PLANS AND TO ISSUE NEW REGULATIONS THAT WILL PROHIBIT PROFITABLE COMPANIES FROM REDUCING THE PENSION BENEFITS OF EXISTING EMPLOYEES OR RETIREES BY CONVERTING TO AGE-DISCRIMINATORY CASH BALANCE PLANS.
THE RECENTLY PROPOSED REGULATIONS WOULD CREATE AN INCENTIVE FOR THOUSANDS OF COMPANIES TO CONVERT TO CASH BALANCE PLANS BY PROVIDING LEGAL PROTECTION AGAINST CLAIMS OF AGE BIAS BY OLDER EMPLOYEES.

Often when companies switch from defined benefit plans to cash balance plans, a worker can work for 20 or 25 years, but the employer may not pay anything into your pension plan for several years. But they will contribute to a younger worker who has only been there for 2 years.

So let's understand this. You have two workers work for the same company, doing the same job. One gets extra wages in the form of a benefit of money put into a cash balance account. The other worker, who has been there 20 or 25 years, does not get it. That is age discrimination, pure and simple, in violation of Federal law. The only reason the one person is not getting it is because they have been there longer.

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The younger worker gets the money; the older worker does not. That is age discrimination, pure and simple.

As we said in our letter:

[THE PROPOSED] REGULATIONS [FROM TREASURY] WOULD RESULT IN MILLIONS OF OLDER EMPLOYEES LOSING A SIGNIFICANT PORTION OF THE ANNUAL PENSION THEY HAD BEEN PROMISED BY THEIR EMPLOYER AND HAD COME TO RELY UPON AS PART OF THEIR RETIREMENT PLANNING.

That is what happened to Larry Cutrone.

We write:

WE URGE YOU TO DIRECT THE TREASURY DEPARTMENT TO IMMEDIATELY WITHDRAW THESE PROPOSED REGULATIONS AND INSTEAD ISSUE REGULATIONS THAT PROVIDE FOR THE PROTECTION OF OLDER EMPLOYEES PENSIONS.

AT A TIME WHEN MILLIONS OF EMPLOYEES ARE STILL REELING FROM SIGNIFICANT LOSSES TO THEIR 401(K) RETIREMENT PLANS BECAUSE OF CORPORATE SCANDALS AND THE ONGOING WEAKNESS IN THE STOCK MARKET, WE BELIEVE THESE REGULATIONS REPRESENT ANOTHER SERIOUS BLOW TO THE RETIREMENT SECURITY OF HARD WORKING AMERICANS WHO HAVE PLAYED BY THE RULES IN THEIR COMPANIES ONLY TO SEE THE RULES OF THE GAME .    .    . CHANGE MIDWAY THROUGH THEIR CAREERS.

I ask unanimous consent this letter, signed by 189 Members of the House and 25 Senators, be printed in the RECORD.

Mr. HARKIN. We have right now over 1,000 cases pending before the Equal Employment Opportunity Commission, over 1,000 cases regarding age discrimination. These are cases of people who have had their retirement pensions, what they were promised, reduced like Larry Cutrone; 1,000 cases filed under age discrimination. I believe these cases have merit. They are going to go forward. They are going to go into Federal courts.

I want to make it very clear: I am not opposed to cash balance plans. Some cash balance plans can be very good. What I am opposed to is the unilateral decision of a company being able to change their plans and stop contributing to an employee's pension without their knowledge. That is what I am opposed to.

That is what this issue is all about. It is fairness. It is equity. I know sometimes when you get into pension laws, things like that, it sounds very convoluted. In essence, what some of these companies have been doing to these workers is nothing less than sheer thievery. They are able to save millions, in some cases hundreds of millions of dollars, by converting these plans over, robbing—yes, I use the word "robbing"—their workers who have been loyal and hard working, robbing them of their rightful claims on future benefits, taking that money and giving it in higher benefits to the CEOs and the corporate executives, golden parachutes. It is not right. It is not fair.

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There is one thing that has distinguished the American workplace from others around the world. We have valued loyalty. If you are hard working and loyal, companies value that. At least they used to. That is one of the reasons we had pension plans—the longer you worked there, the more benefit you had in your pension program. Obviously, the longer you work someplace, the better you do your job, the more you learn about it, the more productive you are. We valued that loyalty.
If companies are able to just change these plans, what kind of a signal does that send to the workers? It sends this signal: Don't be loyal. You are a fool if you are loyal because if you work here for 20 or 25 years, we can just change the rules of the game, and break our promise.

What it says to younger workers is: It would be crazy to work for this company for a long time. I will work here a couple years; I will move on.

It destroys the kind of work ethic we have come to value and that we know built this country. I also thought we valued fairness when it comes to workers. A deal is a deal. Let's say I wanted to hire you. I said: I will hire you for 5 years, pay you $50,000 a year. But if you stay with me for 5 years, I will give you a $50,000 bonus.

You say, OK, that is good. So now you work for me 3 years and you are thinking you have 2 more years to go and you will get that $50,000 bonus. But at the end of the third year I come to you and say: Do you remember the deal we made where I said if you work for me for 5 years you will get that $50,000 bonus? Well, the deal is off.

Well, now you have 3 years invested there. If you had known that the deal was going to be off, maybe you would not have gone to work for me. Maybe you would have gone to work someplace else. Is that the way we want to treat workers in this country, where I have all the cards and you have none, and I can make whatever deal I want, but I can change the rules any time I want to and take away your pension? That is what this is about.

Well, as Senator Durbin said, I thought we had a good meeting with Mr. Snow. I am encouraged by the fact that, as a CEO of his corporation, when they changed their plans over, they left a choice for workers. That is the right and honorable way to do things. I compliment Mr. Snow for having done that. I am also assured that the rules of the game won't be changed in the middle. In other words, there is a moratorium on right now, and I am assured that the moratorium will stay on at least until a final rule is promulgated.

Mr. Snow has said he would agree to meet with people—employers, representatives of labor groups, representatives of elderly groups—to get their input on this approach and, hopefully, on perhaps having a new rule.

I want to make it clear this Senator will continue to press for the Treasury Department—when Mr. Snow gets confirmed and sworn in—to withdraw that rule. He has the power to do it as Secretary of the Treasury—withdraw the proposed rule and come out with a new one that more closely reflects what he had done as a CEO of a corporation earlier on when they changed their plans over. That is the fair way to do it. This is an issue that is not going to go away. Again, I think more and more working Americans are beginning to find out their hard work and loyalty is being taken away and they have no voice. Well, that is what we are here for, to help protect these people, and to make sure their voice is heard and to make sure the pensions they have built up over a long period of time over their working years is not unilaterally taken away by the companies for whom they worked.

Again, I have no intention of holding up Mr. Snow's nomination at all. As I said, my only intention in doing this was to raise this issue up, to make sure Mr. Snow understood the depth of our feelings about it, the history in the Senate that we had passed a sense-of-the-Senate resolution unanimously in 2000, and that there are a lot of strong feelings nationally—just witness the 1,000 cases now pending before the EEOC, plus the fact that there are now about 300 filings right now before the IRS, Internal Revenue Service, by companies wanting to engage in this practice—change from defined benefit plans, to cash balance plans, without protecting the rights of the workers. I have estimated, roughly, that this represents several hundred thousand workers in this country who would be affected by this.

We need to send a clear and strong signal that we are not going to allow this to happen. If companies want to change plans, fine; but give the workers the choice to stick with the plan they have had or to take the new one. That is all we are asking for.

Mr. President, again, I congratulate Mr. Snow on his selection to be Secretary of the Treasury. I look forward to working with him. I thank him for his distinguished career, and I hope he is able to bring to the position that he will assume shortly the philosophy he had when he was the CEO of CSX Rail, and the kind of implementation of the change in their pension plans will be the kind of philosophy that we will have now at the Department of the Treasury.

Every worker in this country ought to have the right to choose just like the workers at CSX had under Mr. Snow. Again, I look forward to working with Mr. Snow on this issue. I hope we can get a fair resolution of this in the days and weeks to come.

I yield the floor and suggest the absence of a quorum.