Y 4. AG 4/2: P38/7 PENSION ASSET RAIDS HEARING BEFORE THE SELECT COMMITTEE ON AGING HOUSE OF REPRESENTATIVES NINETY-EIGHTH CONGRESS FIRST SESSION CIS RECORD ONLY: 32-696 O SEPTEMBER 28, 1983 Printed for the use of the Select Committee on Aging SELECT COMMITTEE ON AGING EDWARD R. ROYBAL, California, Chairman CLAUDE PEPPER, Florida GERALDINE A. FERRARO, New York HENRY A. WAXMAN, California BUTLER DERRICK, South Carolina BRUCE F. VENTO, Minnesota RON WYDEN, Oregon DONALD JOSEPH ALBOSTA, Michigan IKE SKELTON, Missouri DENNIS M. HERTEL, Michigan ROBERT A. BORSKI, Pennsylvania FREDERICK C. (RICK) BOUCHER, Virginia BEN ERDREICH, Alabama BUDDY MACKAY, Florida MATTHEW J. RINALDO, New Jersey, JOHN PAUL HAMMERSCHMIDT, Arkansas NORMAN D. SHUMWAY, California JUDD GREGG, New Hampshire JIM COURTER, New Jersey LYLE WILLIAMS, Ohio CLAUDINE SCHNEIDER, Rhode Island JOHN MCCAIN, Arizona MICHAEL BILIRAKIS, Florida HARRY M. REID, Nevada NORMAN SISISKY, Virginia TOM VANDERGRIFF, Texas ROBERT E. WISE, JR., West Virginia BILL RICHARDSON, New Mexico JORGE J. LAMBRINOS, Staff Director PAUL SCHLEGEL, Minority Staff Director (II) Howard Young, special consultant to the President, and director, social Alan D. Lebowitz, Acting Administrator, Pension and Welfare Benefit Programs, U.S. Department of Labor, accompanied by Charles William- son, Assistant Administrator for Enforcement, and Robert N. Eccles, Acting Associate Solicitor, Plan Benefits Security Division, Office of the S. Allen Winborne, Assistant Commissioner for Employee and Exempt -Organizations, Internal Revenue Service, accompanied by Ira Cohen, Director, Actuarial Division, and Bill Posner, Special Assistant for Appendix 1. Additional material received for the record-Continued Bob Scheddin, New York, N.Y., letter.... Nicholas Rotolo, letter and attachment.. Appendix 2. Correspondence between the Select Committee on Aging and the Department of Labor concerning overfunded defined benefit pension plan Appendix 3. Correspondence between the Select Committee on Aging and the Internal Revenue Service concerning the overfunded defined benefit pen- Appendix 4. Correspondence between the Select Committee on Aging and the Pension Benefit Guaranty Corporation concerning overfunded defined bene- Appendix 5. Summary judgment opinion and order in the Harper & Row Appendix 6. Working paper that examines the financial condition of 21 of the companies terminating overfunded plans, by Mary S. Stone, CPA, Ph.D. assistant professor, University of Alabama Appendix 7. Memorandum, from the Ad Hoc Group on Pension Plan Termi- nations to the Department of the Treasury and the Internal Revenue Service, concerning pension plan terminations and asset reversions to em- PENSION ASSET RAIDS WEDNESDAY, SEPTEMBER 28, 1983 HOUSE OF REPRESENTATIVES, The committee met, pursuant to notice, at 10 a.m., in room 2325, Rayburn House Office Building, Hon. Edward R. Roybal (chairman of the committee) presiding. Members present: Representatives Roybal of California, Biaggi of New York, Ferraro of New York, Vento of Minnesota, Sisisky of Virginia, Vandergriff of Texas, Rinaldo of New Jersey, Hammerschmidt of Arkansas, Daub of Nebraska, Evans of Iowa, Schneider of Rhode Island, Ridge of Pennsylvania, Bilirakis of Florida, and Siljander of Michigan. Staff present: Jorge Lambrinos, staff director; Roger Thomas, pension counsel; Suzanne Davis, staff assistant; Mary Webb, assistant; and John Vihstadt, minority counsel. OPENING STATEMENT OF CHAIRMAN EDWARD R. ROYBAL Mr. ROYBAL. The House Select Committee on Aging will now come to order. In 1974, the Congress enacted the Employee Retirement Income Security Act (ERISA), the Federal pension law which seeks to protect workers and their families who are covered by employer-sponsored pension and welfare benefit plans. ERISA was passed in response to a litany of pension abuses, many of them perpetrated by employers against their employees and their retirement security. Few authors of this landmark legislation would have believed that any form of plan asset diversion could survive the strict rules of ERISA regarding conflicts of interest between employers and their pension plans. Well, the authors of ERISA, the Congress, will now sadly learn that the manifold protections for workers under pension plans, under the Internal Revenue Code and through the fiduciary of ERISA, presumably do not apply to what can only be described as "pension piracy" perpetrated by employers against their "overfunded" defined benefit pension plans. According to the Internal Revenue Service and the U.S. Department of Labor, the Federal agencies charged with responsibility for administering ERISA and protecting workers' pension rights, no problem exists and the diversion of pension assets and their attendant benefits into corporate coffers simply falls into a legal exception in the law. Simply, employers are terminating their overfunded pension plans to capture so-called "excess or surplus" assets, a practice |