[Senate Hearing 105-764]
[From the U.S. Government Publishing Office]
S. Hrg. 105-764
AGENCY MANAGEMENT OF THE IMPLEMENTATION OF THE COAL ACT
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HEARING
before the
SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND
THE DISTRICT OF COLUMBIA
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
__________
OCTOBER 6, 1998
__________
Printed for the use of the Committee on Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
51-892 cc WASHINGTON : 1998
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
Hannah S. Sistare, Staff Director and Counsel
Leonard Weiss, Minority Staff Director
Lynn L. Baker, Chief Clerk
------
SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND
THE DISTRICT OF COLUMBIA
SAM BROWNBACK, Kansas, Chairman
WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut
ARLEN SPECTER, Pennsylvania MAX CLELAND, Georgia
Marie Wheat, Staff Director
Laurie Rubenstein, Minority Staff Director and Chief Counsel
Esmeralda M. Amos, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Brownback............................................ 1
Senator Specter.............................................. 12
Prepared statement:
Senator Cochran.............................................. 21
WITNESSES
Tuesday, October 6, 1998
Hon. John D. Rockefeller, IV, a U.S. Senator from the State of
West Virginia.................................................. 4
Hon. Kent Conrad, a U.S. Senator from the State of North Dakota.. 8
Kathy Karpan, Director, Office of Surface Mining Reclamation and
Enforcement, Department or the Interior........................ 16
Marilyn O'Connell, Associate Commissioner, Office of Program
Benefits Policy, Social Security Administration................ 18
Alphabetical List of Witnesses
Conrad, Hon. Kent:
Testimony.................................................... 8
Prepared statement........................................... 26
Karpan, Kathy:
Testimony.................................................... 16
Prepared statement........................................... 51
O'Connell Marilyn:
Testimony.................................................... 18
Prepared statement........................................... 57
Rockefeller, Hon. John D. IV:
Testimony.................................................... 4
Prepared statement........................................... 22
Appendix
Letter submitted by Senator Specter, dated July 31, 1998, to
Keneth S. Apfel, Commissioner, Social Security Administration,
and his response dated Aug. 10, 1998........................... 28
Letter submitted by Senator Specter, dated July 31, 1998, to
Michael Holland, Chairman, Board of Trustees, UMWA Health and
Retirement Funds, and his response dated Oct. 6, 1998.......... 30
Deborah Walker, Acting Deputy to the Benefits Tax Counsel,
Treasury Department, prepared statement........................ 64
Letter from Cynthia M. Fagnoni, Director, Income Security Issues,
GAO, dated Oct. 2, 1998, with subject entitled: ``Employee
Benefits: Status of the UMWA Combined Benefit Fund............. 69
The Reachback Companies, prepared statement...................... 76
Addtional information submitted for the record from Ms. Karpan,
Director, U.S. Department of the Interior...................... 82
AGENCY MANAGEMENT OF THE IMPLEMENTATION OF THE COAL ACT
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TUESDAY, OCTOBER 6, 1998
U.S. Senate,
Oversight of Government Management, Restructuring,
and the District of Columbia Subcommittee,
of the Committee on Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:19 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Sam
Brownback, Chairman of the Subcommittee, presiding.
Present: Senators Brownback and Specter.
OPENING STATEMENT OF SENATOR BROWNBACK
Senator Brownback. Good afternoon. The hearing will come to
order. Thank you all for joining us this afternoon for this
meeting. I am sorry for the delay. We had another meeting that
was going on over near the Senate floor and I apologize for the
delay. But I do appreciate all of you attending.
I would like to welcome everyone here today. I particularly
appreciate Senator Cochran, who was here earlier, but had to go
back to the floor, and Senators Rockefeller and Conrad, for
being here with us. I look forward to our next panel of
witnesses, as well. They represent the various agencies
involved in the implementation of the Coal Act.
During this oversight hearing, we are going to examine the
1992 Coal Act, why the Coal Act is important, and look towards
its future. It is important for many reasons, but first of all,
it is important because the legislation put into effect a
mechanism to ensure that retired coal miners and their
dependents would have health insurance that they could count
on. It is important that the fund remain solvent to protect
those who need the benefits afforded them in the original
legislation.
The Board of Trustees for the fund received a report in
June of this year prepared by the former actuary of the Health
Care Financing Administration, Guy King. In the report, Mr.
King looked at a baseline scenario and three other scenarios to
illustrate the impact of particular changes in the operations
of the fund. He found that, ``Under all four scenarios,
liabilities are first projected to exceed fund assets in Plan
Year 2000.'' That actuarial assessment concerns me greatly.
I am also concerned about how the Coal Act is being
implemented and how the recent Supreme Court ruling in the
Eastern Enterprises v. Apfel case will impact the financial
management of the fund.
The Coal Industry Retiree Health Benefit Act, or what I
referred to as the Coal Act, was enacted as part of the Energy
Policy Act of 1992. This Act changed the financing of health
benefits for retired UMWA (United Mine Workers of America)
miners and their dependents. Congress created the Combined
Benefit Fund to manage and administer benefits and injected the
Federal Government into the operation of the health care plans
for retired miners.
Several government agencies were involved in implementing
the Act--including some of whom we will hear from today. The
Social Security Administration, the Health Care Financing
Administration, and the Internal Revenue Service were all
involved in making the Coal Act work.
Previous to the Coal Act, employers had contributed to the
UMWA benefit funds based on the number of coal production hours
worked by their current employees. The Coal Act changed the
formula to an annual per capita payment (or a premium) for each
beneficiary assigned to a particular company who was the
beneficiary's last employer of record. This is what is known as
the ``reachback tax''--the ``tax'' or premium for fiscal year
1999 is $2,420.19 per beneficiary.
Now, the reason it is called ``reachback'' is because in
enacting this legislation, Congress ``reached back'' to assign
beneficiaries to companies other than those who had signed a
1988 bargaining agreement. Companies could be forced to pay
this tax if they had ever signed a National Bituminous Coal
Wage Agreement since 1946 and prior to 1988, or if they met any
of the other requirements under the Act.
A company that, prior to 1974, had either stopped mining
coal or was not signatory to a UMWA contract is required to pay
its assigned retirees' health care premiums under a ``super-
reachback'' status. The retiree can be assigned to a mining
company who had signed any of the coal wage agreements before
1978 and who is still in business of any kind, whether or not
in the coal industry. The assigned company's obligation is
perpetual. With one Act of Congress, the Federal Government
literally reached back over decades to find companies, their
successors, and legal skeletons to companies to partially
finance this plan.
Since enactment, the mechanisms for funding coal miner
retirees' health benefits in the Energy Policy Act have yielded
a number of court decisions wrestling with their
constitutionality. Until recently, the court decisions have
upheld the constitutionality of the Coal Act. But this year,
the U.S. Supreme Court ruled in the Eastern Enterprises v.
Apfel case, that the Coal Act is an unconstitutional taking due
to its super-reachback (retroactive) provision.
Justice O'Connor, writing in the majority opinion, stated
this: ``In enacting the Coal Act, Congress was responding to a
serious problem with the funding of health benefits for retired
coal miners. While we do not question Congress' power to
address that problem, the solution it crafted improperly places
a severe, disproportionate, and extremely retroactive burden on
Eastern.''
This ruling, handed down June 25, calls into question the
financial mechanisms used to finance the fund as well as the
ability to administer and manage the funds. The ruling could
potentially affect approximately 250 reachback companies;
however, at this time, it is unclear who will be affected and
who will continue in litigation.
I believe the financial status of the fund combined with
the recent Supreme Court decision is cause for this
Subcommittee to look into the implementation of the Coal Act.
It is my hope that the testimony provided by our witnesses
today will highlight for us the issues raised by the Eastern
Enterprises v. Apfel case and help us understand the long-term
financial implications for the funds. Through government
oversight of the implementation of the Coal Act here today, we
help to ensure that Congressional action is living up to its
intended purpose to help coal miners in a fair and equitable
manner for all those involved.
These are the reasons that I wanted to hold the hearing
today, and what I am going to be looking forward to from the
various witnesses is to talk about these various issues that
have been raised about the actuarial fund being able to live
past the plan year 2000. What can Congress do to ensure
solvency of the fund and to protect the health insurance of
retired coal miners? The second question I have, is the Supreme
Court ruling of this year that the Coal Act was an
unconstitutional taking, does the Congress need to act to
clarify the situation? And third, is the Coal Act being
implemented in a fair and equitable manner by the Federal
agencies involved? I hope we can shed some light on those
issues amongst some others as we go through this hearing.
I appreciate the panel of Senators that are here today. I
think, Senator Specter, if you would not mind, I will go to
these witnesses that have been here and hear their
presentation, or do you have an opening statement you would
prefer to make at this time?
Senator Specter. I do, but I would be delighted to defer to
my colleagues who are here.
Senator Brownback. In a first-in-time gesture, if you do
not mind, I will go ahead and do that because they were very
kind to be here.
Senator Specter. Mr. Chairman, might I make a suggestion?
There are a lot of people standing outside. There are some
chairs here that were reserved for witnesses, and I think we
might allow quite a few more people in here, maybe even occupy
some of the chairs on the dias until we have more Senators
here. It is always uncomfortable to see taxpayers in the
hallway when they want to see what is going on inside.
Senator Brownback. That is a wonderful suggestion. If we
could have the guards let some people in for the reserved
seating here, I think that would be a good thing so that we can
have some more people moving in, if they could do it as quietly
as possible and we will go ahead and proceed with the hearing
and not hold up too much of the time. But let us go ahead and
let in as many as we possibly can. If some of you standing in
the back can move on over some to the side, too, or if we can
get some people moving up, as well, that will help get more
people in.
Thank you very much. Our two panelists that are up on this
first panel, Senator Jay Rockefeller, U.S. Senator, and Senator
Kent Conrad. I do not know if either of you have an order you
would prefer to go in.
Senator Rockefeller. It is up to the Chairman.
Senator Brownback. Senator Rockefeller, we will call on you
first. Thank you for joining us and being here today.
TESTIMONY OF HON. JOHN D. ROCKEFELLER, IV,\1\ A U.S. SENATOR
FROM THE STATE OF WEST VIRGINIA
Senator Rockefeller. Mr. Chairman, with all due respect, I
want to clarify one statement that you made in introducing this
subject, when you said that the U.S. Supreme Court had ruled
the Coal Act unconstitutional. That is manifestly inaccurate.
It took one tiny part representing a very small fraction of
retired coal miners, and in what I would consider very faulty
decision making on that part, exempted them or the companies
that represent or are declining to take care of them. But by no
means did it call the Coal Act unconstitutional.
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\1\ The prepared statement of Senator Rockefeller appears in the
Appendix on page 22.
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The Coal Act is in effect. Benefits will be paid. It only
exempted that very small portion done by Eastern, and as others
will determine, maybe up to 6,000 out of the total of 77,000
that remain.
In any event, thank you for allowing me to testify. This
law was passed in 1992. Senator Specter and I and others worked
very hard to pass this. At that time, there was no interest in
the legislation whatsoever, and as a result, which I found
ironic and disturbing, we were able to get it done just before
Christmas, primarily because I said I would hold the Senate in
through Christmas, a thought I enjoyed very much.
At that time, there were 120,000 retired coal miners. I
think it is interesting to point out that there are now
somewhat over 70,000 remaining because, as we said at the time,
5,000 to 6,000 miners are dying every single year while we
continue year after year after year to try and take this thing
apart, or at least some are trying to take this apart. They
claim not to be, but that is what they are trying to do.
Before I begin, let me recognize that there are a lot of
coal miners in this hearing room today. Their presence is the
most compelling testimony. I do not know if either the Chairman
or if my fellow witness have ever spent much time in a coal
mine or been in a coal mine, but let me only say that if you go
into a coal mine for about 2 hours, you will spend the next 2
days blowing coal dust out of your nostrils. If you spend 30 or
40 years, you will have grievous injury and broken bones and
broken lungs and all kinds of other things, the likes of which
most Americans have absolutely no idea.
Even in my own State of West Virginia, I would say that 95
percent of the people have never been underground. They know
coal mining, but they do not know coal mining the way coal
miners know it. They do not know the dangers of it. They do not
know what it is to work up to their knees in cold water, the
threat, particularly in former times when these miners here are
affected, of roof falls, slate falls, the horrible, horrible
conditions, hunched over doing their work so that the Nation
and its industrial might would survive.
I think there are three basic things that we should agree
on, I hope that the entire Congress would agree on. The 71,000
retired miners who are left, and that is all there are--it used
to be 122,000, now it is 71,000 because they are dying between
5,000 and 6,000 a year--first, that those 71,000 retired miners
and their family members who today depend on the Coal Act must
not have their rights traded away for the interests of
companies who want to be relieved of their responsibility so
they do not have to pay for their responsibilities.
Second, that health benefits were promised to these miners
when they went underground and they must be kept. That was not
an incidental occasion. It involved a man by the name of Harry
S Truman, and John L. Lewis, in which hundreds of thousands,
maybe a half-a-million coal miners were willing to lose their
jobs in an exchange of mechanization on the one hand and return
on the other hand for pension and health benefits, of which
health benefits are the most important and what this argument
and hearing and last 6 years has been all about.
And third, those of us who support and defend the program
have always been open to suggestions to improving the program.
But we have a moral obligation for which some of us will
absolutely not retreat under any conditions based upon a firm
historical basis to fight any effort in any way that gets a
company out of their obligations to their workers.
The Coal Industry Retiree Benefits Act, known as the Coal
Act, as I say, was passed in 1992. It was basically crafted in
its final analysis by the Bush administration and therefore
was, and is a bipartisan effort and was government operating at
its very best.
I just want to try to humanize this a little bit to say
that there is a lot more about the Supreme Court and Congress.
This is about individual people, people who have had to stand
up for their families, who have lived difficult lives, who have
worked in ways that the rest of us have absolutely no idea what
even the word ``work'' means when it comes to working
underground.
In the back of the room, there is a man by the name of Nick
Pascovich. Nick, will you stand? Nick is here from Clarksville,
Pennsylvania. He is one of the 71,377 miners and widows who
rely on the Coal Act. There are tens of thousands of them that
live in Pennsylvania, men and women also in West Virginia and
Pennsylvania. Those are two of the very biggest States. In
fact, every single State and the District of Columbia has these
folks.
Mr. Pascovich is 78 years old. That is the exact average
age of all of the folks that we are talking about, people in
their late 70's. He worked in the coal mines for 43 years. I
cannot imagine the effect on a human being of working in a coal
mine underground for 43 years, Mr. Chairman. He has to sleep
sitting up in a chair so he can breathe. Without the Coal Act,
he would not breathe.
His employer and every company in the coal industry knew
that health and retirement benefits were for life. You could
quibble with the commas, but that, they knew. Every company
that signed a bituminous coal wage agreement made that promise.
Every company that signed such an agreement from 1974 had that
promise explicitly written in the contract. Nick Pascovich is
what this program is all about and the miners like him.
One more person, and that is all I will take advantage of
your courtesy on this matter, Mr. Chairman, and this is May
Shukart, who is over here. She is a person who should make it
very plain why the Coal Act has to be protected. Mrs. Shukart
is 67 years old and lives--and Senator Specter, help me on
this--in Nemacolin, Pennsylvania. Her husband, Charles, worked
for 30 years in the mines, underground. Mr. Shukart passed away
years ago, but he died knowing that he had taken care of his
family through the sweat of his labors and with the protection
of the Coal Act.
Mrs. Shukart herself, and I hope she does not mind my
saying this, has been diagnosed with cancer, which is currently
in remission, thank God, but remission does not mean clearance,
and should it come back, she has every reason to fear if the
Coal Act is not there. Does she deserve peace of mind? By law
and by God's judgment, she surely does.
I want to assure my colleagues, in case there is any
confusion, that when it comes to the Mr. Pascoviches and the
Mrs. Shukarts that there is nothing I will not do to protect
them and to protect their rights under a law which was passed 6
years ago, signed, and which has been fought out to the extent
that there is never a meeting of the Finance Committee in which
I do not have Ellen Dineskie sitting over there at that Finance
Committee, no matter what the subject is, because I have to be
aware of the fact that there are those who want to undermine
it, to repeal it, to subvert it, put good words on it, but
basically take away. So she is always there when the Finance
Committee meets in case somebody wants to slip in an amendment.
The subject of this hearing is agency implementation of the
Coal Act, and I understand that, but I believe the real concern
of many here is that the longtime push of certain reachback
companies to be relieved of their obligations under the Act,
that is what this is really about.
As the Chairman is aware, the Finance Committee, on which I
serve and which Senator Conrad serves, has sole jurisdiction
over the Coal Act. This Committee has no jurisdiction
whatsoever. Certain Chairmen and ranking members of the Finance
Committee have made that particularly clear to this Committee.
The Finance Committee, I would point out, has not chosen to
have a hearing on the Coal Act and reachback companies have
sought other forums and have succeeded.
Some members may believe that the recent Supreme Court
decision on Eastern Enterprises v. Apfel is a rationale to
review or reopen the Coal Act. Anything is a rationale to
reopen the Coal Act. The way I read the Court decision is, in
fact, different. It strongly reaffirms that a promise was made
to coal miners that must be kept that all reachback and
signatories from 1988 and later must keep up their end of the
promise. The Court only ruled that the Act as it narrowly
applied to Eastern Enterprises was unconstitutional, period.
While other courts may rule that similarly situated super-
reachback companies should also be relieved of their obligation
to pay, this is and will be by any interpretation a very small
subset of payers in the UMW Combined Benefit Fund and will not
disturb the basic functioning of the Act as intended by
Congress, as passed by Congress, and as signed by the
President. Let me repeat for those retired miners who are
concerned about their health benefits, the Coal Act remains in
effect and benefits will continue to be paid.
I understand that Social Security and the Department of the
Interior will testify about their management policies, and I
will be right here listening to that testimony.
I should remind my colleagues that reachback companies
signed coal wage agreements promising lifetime health benefits,
just as the group of 1988 and later operators also did.
Nevertheless, a group of reachback companies have consistently
appealed to Congress to relieve them of their responsibilities
under the Coal Act. Congress has not supported these requests,
but it has not diminished their efforts.
Senator Cochran has introduced such a bill, which seeks to
provide the reachbacks with relief. In my view and the view of
the United Mine Workers of America, Senator Cochran's proposal
would jeopardize the health benefits of 71,000-plus retired
miners and widows who depend on the Act. On that basis alone, I
could never support it and will do everything I can to defeat
it if it ever raises its head.
Moreover, I cannot support any proposal that would put
those companies who are paying for their former employees'
health benefits at an unfair competitive advantage with
competitors who decide they do not want to pay theirs.
Now, one piece of irony, and then I will conclude. Since
the enactment of the Coal Act, various reachback companies have
claimed that there was a large and growing surplus in the
Combined Benefit Fund. This was the early years. That was the
cry. Oh, there is this terrific surplus. We are going to be
able to take all of this and give tax relief to all of these
companies. They will not have to pay. And that was the argument
that we heard back in the years around 1995.
Now, 2 years later after 1995, in 1997, the argument
changes. Some of the same reachback companies say that there
was a large looming deficit in the Coal Act, in the Combined
Benefit Fund, and that Congress should reduce their tax
obligations under the Act and at the same time nearly double
the taxes on their competitors who signed a 1988 or later coal
wage agreement to save the fund. It is interesting how
obligations and viewpoints change.
In any event, in concluding, I am told that 10 of our
Nation's largest companies--and I would be happy to read off
the names and, in fact, I will, LTV Steel, Pittston Mining,
A.T. Massey Coal, NACO Industries, Allied Signal, YNA Coal
Company, Blue Diamond Coal, Eastern Enterprises, Berlin
Resources, and Barnes and Tucker, Milburn/Imperial Collieries--
will get three-fourths of the $40 to $50 million of tax relief
under proposals like Senator Cochran's. This is not something
which I consider in the American tradition and it is something
that you can be sure that I will do my best to oppose.
The relationship between all of this and Medicare, Mr.
Chairman, just like Medicare recipients, retired coal miners
were promised that they would have certain health benefits when
they retire. I am on the Medicare Commission for the future of
Medicare and we are trying to figure out now how to take money
that we do not have and money which we are going to have even
less of in the future to be sure that we guarantee Medicare
beneficiaries what they were promised even back at a time when
Medicare medical benefits were insufficient compared to what
they need to be today.
We will find that money, because Medicare is well-known and
popular. Well, in West Virginia and Pennsylvania, and a number
of other places, the Coal Act is well-known and popular and
there are those of us who will do everything we can to defend
it. I thank the Chairman.
[Applause.]
Senator Brownback. If we could, I would like to hold the
applause down on future witnesses, if possible. I appreciate
your support for Senator Rockefeller and I appreciate your
attendance, but we do like to try to keep a certain demeanor
about the Committee room, if we can.
I hope Senator Rockefeller can answer some of the questions
that I posed at the outset when we go to the questioning time
period, such as how do we pay past the year 2000 and the impact
of the Supreme Court's ruling of constitutionality regarding
the super-reachback, as I noted correctly in my opening
statement.
Senator Conrad, thank you for joining us.
TESTIMONY OF HON. KENT CONRAD,\1\ A U.S. SENATOR FROM THE STATE
OF NORTH DAKOTA
Senator Conrad. I thank the Chairman and Members of the
Subcommittee, and I thank my colleague, Senator Rockefeller. I
appreciate the willingness of this Subcommittee to hold this
oversight hearing on the state of the UMWA Combined Benefit
Fund and the reachback tax.
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\1\ The prepared statement of Senator Conrad appears in the
Appendix on page 26.
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I think, at the first, we should make very clear that we
all share an obligation to the more than 70,000 UMWA retirees
and their families whose benefits are covered by the fund. We
are all committed to sound and secure financing for their
health benefits.
First of all, I want to acknowledge the extraordinary
leadership of Senator Rockefeller on this issue. These benefits
would not have been provided for without his determined fight
to make certain that these miners and their families were
appropriately covered, and that principle ought to be observed
by all of us. These retirees deserve to have the promises to
them kept, and I can say that nobody has been more determined
or more effective as a fighter than Senator Rockefeller. Rarely
have I seen a colleague put forth the personal effort that he
has to make certain that rights of people that he represent are
addressed. I think that needs to be said right at the outset.
I also want to say that I believed right from the start
that while the goal was right, the means were not the best. My
own view is that the reachback tax has severe deficiencies, not
only in its ability to actually provide the funds necessary to
keep the benefits, but also that it is unfair to certain of the
companies that are called upon to pay.
Now, let me acknowledge right up front that I was one who
thought 3 or 4 years ago that we were going to have a surplus
in this fund, and, in fact, we had a surplus at that time and
it appeared as though we would continue to have a surplus. That
was wrong. We were mistaken. I was mistaken, and I want to
acknowledge that right here. Senator Rockefeller is entirely
correct on that matter, as well.
But I still believe that this means of financing is
mistaken, at least in part, and I think that is the reason that
we have seen the Court determination that came down in the
Eastern case.
In addition, the report to the fund's trustees last June by
Guy King, the former chief actuary for Medicare, confirmed what
many of us now believe, that under even the most optimistic
economic assumptions, the fund's liabilities are going to
exceed its assets by plan year 2000. What has happened here, in
part, is that these costs continue to go up more rapidly than
was anticipated, and that is because, of course, of medical
inflation. Medical inflation is running ahead of general
inflation. There is really no question anymore that the 106th
Congress will have to act to ensure the security of these
benefits.
Let me also say there are some who do not care about that.
Senator Rockefeller is also correct about that. There are some
who do not care whether or not these benefits are paid. I mean,
we have colleagues, and Senator Rockefeller and I know very
well, who really do not care. They want to protect the
companies at any cost, and that is wrong. I do not agree with
those people. I think, as a basic principle, the first should
be that the promises to these retirees be kept. The question
is, how should it be done?
When the Coal Industry Retiree Health Benefit Act was
passed in 1992, the then-Chairman of the Ways and Means
Committee observed that it created numerous inequities among
the companies that will be required to pay for those benefits.
He predicted that those many difficulties would force the
Committee to reconsider this arrangement in the very near
future. Now, he was wrong as to timing in 1992. He thought it
was going to happen more quickly. But I think he is right with
respect to the question of inequities between companies.
Another senior member of the Ways and Means Committee, Jake
Pickle, criticized the Coal Act as creating a terrible
injustice by levying a tax on companies who had left the
industry to support a benefit plan negotiated by those
remaining in the industry who did not want to pay for its cost.
Mr. Pickle saw the Act as a bad precedent in the pension area
which we would all live to regret.
Now, a number of things have happened in the meantime that
show, I believe, that Chairman Rostenkowski and Mr. Pickle were
correct. Even if the fund were not facing a fiscal crisis, the
Supreme Court in the case of Eastern Enterprises v. Apfel found
a major portion of the Coal Act to be unconstitutional. We
could argue about whether it is a major part or a minor part.
The fact is, the Supreme Court has said a group of companies,
Eastern and others who are similarly situated, should not be
paying into the fund. It found that reaching back to the 1960's
to tax companies which had left the bituminous coal industry to
pay for miner benefits in the late 1990's was barred by the
Constitution.
Mr. Chairman, I genuinely believe that, above all, these
benefits ought to be paid. The promise ought to be kept. But I
believe that those companies who are the signatories have the
financial obligation.
The problem is, that may be too big a burden for those
companies. One alternative would be to ask for the AML fund to
pay a greater share than it currently does and to relieve some
of those companies that are really far removed from the
business. Those are companies that could be relieved and we
could take on as a public obligation some of the financing
requirement, in addition to those companies that remain as
signatories.
The effect of the Coal Act was to attempt to supplant a
private multi-company pension contract under which benefits
were paid only by the parties to the contract. Because those
private parties did not want to pay the full cost, they went to
Congress and persuaded us to enact a Federal law that placed a
major part of the costs on companies who are no longer
signatories to the contract and had already left the industry.
I believed at the time that we passed the measure that it was
simply the wrong way to meet the very legitimate needs of the
retirees.
The Coal Act compounded its unfairness by enforcing taxes
through particularly harsh penalties. Part of the result has
been that some of the very small companies have been forced to
the brink of bankruptcy. Some have even been forced out of
business. I do not think that is in anybody's interest. It is
certainly not in the interest of the workers for those
companies or their retirees.
In prior hearings, we have seen that many small companies
are being placed in a very difficult and precarious position
because of these premiums. The litigation expense relating to
the Act's assignments of beneficiaries and other matters has
run into the millions of dollars, and in light of the Supreme
Court's decision in Eastern Enterprises, it is reasonable to
expect even more litigation.
I believe we ought to take this opportunity to keep the
commitment to the retirees and their families and to do it in a
way that is not vulnerable to legal challenge nor to the
depletion of the resources available to meet the requirements
of their benefits.
The facts are plain. Congress will be forced to address
this matter again. I believe today's hearing is only a
beginning of that process, and again, I want to acknowledge
what Senator Rockefeller has indicated, that the Finance
Committee has the jurisdiction over this matter, although I
would certainly acknowledge that this Committee has an ability
to oversee the agencies' handling of the fund. You have that
jurisdiction.
I look forward to working with the Chairman and others of
our colleagues who are interested in helping the Finance
Committee fashion a reasonable framework for a solvent and
reliable health benefit plan for these retired miners and their
families.
Mr. Chairman, if I could just say on a personal note,
nothing is going to happen here without Senator Rockefeller
being convinced that it is in the interests of the people that
he represents. I can tell you nothing is going to happen
because I have seen him defend this Coal Act with a ferocity
that I have never seen by any other member on any other issue
in my 12 years in the U.S. Senate. So nobody should be under
any illusion on this matter. Senator Rockefeller is going to
protect those retirees. He feels morally bound by the
commitment that he has made. I, for one, have enormous respect
for him because of that commitment.
I also believe that there is going to be a need to find a
way to provide other financing. I also believe that the Act is
unfair to certain of the companies that are asked to
contribute. I believe there is a way, ultimately, to resolve
these issues in a way that, (1) assures the retirees of the
benefits that they have been promised; that, (2) corrects the
unfairness in the Coal Act in terms of the reachback nature of
the levies on some of those companies that I believe should not
have been asked to step up; and (3) that will deal with some of
the legal challenges that face the Coal Act with respect to
some of the companies that are now being taxed.
Mr. Chairman, Senator Rockefeller faced an extraordinary
challenge when he put the Coal Act together. He knew the need
that existed. He understood it with greater clarity than
perhaps anybody else in the Congress. That motivated him to
fight, again, with a commitment that I have never seen by any
other member on any other issue.
He had to make compromises. It was not a case where Senator
Rockefeller was able to sit down at the table and just write it
the way he would like to do it. He had to deal with not only
the Senate of the United States, he had to deal with the U.S.
House of Representatives, he had to deal with an
administration, and the result was a compromise. The underlying
goal, I think, was laudable and correct. I think part of the
financing mechanism has problems, and I know Senator
Rockefeller feels very strongly that if you start to deal with
any of this, you could unwind the whole agreement, and that is
what he is desperately afraid of.
I just want to say to Senator Rockefeller and others who
might be listening, I would not be party to anything that would
jeopardize the benefits of these retirees. This promise must be
kept to those retirees. It must be kept.
But I also believe that there are things we could do to
reduce the unfairness in terms of some of the companies
affected and to assure a more reliable source of financing.
Perhaps reliable is not the word so much as one that will
assure that the funds are adequate, because I do think we face,
according to the actuary, a problem in the near future, and I
say that as somebody who thought we were going to have a
surplus. We were wrong about that, completely wrong. Now we
have an actuary telling us that there is going to be a
shortfall.
We ought to, as we go through this, assure that there is
not going to be a shortfall, that these retirees are covered,
but that we reduce the unfairness of the Act. I thank the
Chair.
Senator Brownback. Thank you very much, Senator Conrad. I
appreciate that statement. I appreciate also the spirit in
which it is put forward, because that is the spirit in which
this hearing is being called, is that nobody is suggesting
whatsoever to do away with the Coal Act. That is not being
suggested. What is being suggested and asked about here is the
legitimate concerns about whether we are going to have money
for it and what other options are available. So I appreciate
very much you being willing to put forward some suggestions
that you would have, and hopefully we can dig into those more
as we go on into the hearing, because this Act needs to be
protected. It needs to be financed. It has to be financed if it
is going to be protected.
Senator Specter has been very gracious in being willing to
wait as we have gone around the horn here, and Senator Specter,
I want to make sure to get you in on this for an opening
statement or otherwise that you might like to make at this
time.
OPENING STATEMENT OF SENATOR SPECTER
Senator Specter. Thank you very much, Mr. Chairman. For
those who are standing, there is room in the back room on
closed-circuit television, where there are some chairs. Quite a
few people are watching back there. There are a couple more
seats up here. If you want to be a part-time Senator, you can
sit at the dias.
Senator Brownback. It is a great view from up here.
Senator Specter. It is always disheartening, and I know
Chairman Brownback agreed, to have taxpayers standing in the
hallway and not being able to participate. There are a great
many people who have a very keen interest and a lot of people
have come from a long way.
I do have a few comments to make at this point. I am
pleased to hear Chairman Brownback's comment about retaining
the Coal Act and I am pleased to hear what Senator Conrad has
said about his determination to continue the commitment made to
the coal miners for health care, even though Senator Conrad has
introduced legislation, S. 1102, which would give some of the
smaller companies relief. The question really is how we
maintain the coverage under the Coal Act.
Senator Rockefeller is correct that the legislation was
enacted, signed by a Republican President, President Bush, in
1992. I recall very well the day. We have a lady from
Nemacolin, which is the hometown of Richard Trumpka, who used
to be President of the United Mine Workers and is now Secretary
General, the No. 2 officer of the AFL-CIO. But 1 day many years
ago, I took a trip to Southwestern Pennsylvania--Washington,
Pennsylvania--and in a Holiday Inn talked to a large group of
retirees who did not have health benefits. This Act was
structured, and I think Senator Conrad accurately characterizes
the work that Senator Rockefeller did. He had a little bit of
help here and there. Some of us pushed along with him.
When the decision came down in Eastern Enterprises, I wrote
to Michael Holland, Chairman of the Board of Trustees to the
UMW health and retirement funds, and also Commissioner Kenneth
Apfel, Social Security Administration, on July 31, and I would
ask that those letters be made a part of the record, Mr.
Chairman.\1\
---------------------------------------------------------------------------
\1\ Letter submitted by Senator Specter from Mr. Apfel appears in
the Appendix on page 28.
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Senator Brownback. Without objection.
Senator Specter. And also the response by Commissioner
Apfel to me dated August 10 and the response by Mr. Holland
dated October 6.\2\
---------------------------------------------------------------------------
\2\ Letter submitted by Senator Specter from Mr. Holland appears in
the Appendix on page 30.
---------------------------------------------------------------------------
Senator Brownback. Without objection.
Senator Specter. In the body of this correspondence, I
raised the question as to what was going to happen to the
funding. How many companies can be relieved of obligations
under the Supreme Court decision and what would be done to make
sure that there was an adequate fund?
I was pleased by Social Security Commissioner Apfel's
response that the intention was, as he put it, ``Our intention
is to place all voided assignments into an unassigned pool
until a permanent decision can be made on placement in order to
ensure continuing funding of the health benefit plans.'' It is
worth noting that some 124 companies have been relieved of
liability and some 6,167 miners formerly assigned to these
companies have been placed in an unassigned pool, but they are
continuing to receive benefits, and that is the critical part.
I am concerned about these issues, obviously, as a U.S.
Senator, because this issue goes far beyond Pennsylvania, but
we have almost 15,000 Pennsylvanians who are covered here and
many of them are in this room today, who have come a long
distance to hear what we are undertaking to do.
So I believe that our task is plain. When the Supreme Court
hands down a decision, that is the law of the land, and it is a
confusing decision. It is a 5-to-4 decision and four justices
said one thing and one justice said something else to make up
the five, and four other justices said the contrary, and that
puts the issue back in the lap of the Congress and we have to
figure out how to make sure that the funding is adequate for
the retirees.
I like the emphasis which everybody has placed, Chairman
Brownback, Senator Conrad, of course, Senator Rockefeller, and
I, too, that the maintenance of the commitment to the miners is
most important. I think that should be very substantial
reassurance to the retirees who are here who are very much
concerned about what may occur.
We are scheduled to have a vote in the Senate at 3:15 and I
intend to sit through until we have to leave for the vote and
then I have other commitments, but I will be watching the
proceedings very closely through staff and will work hard to
maintain the commitment to the miners. Thank you.
Senator Brownback. Thank you very much, Senator Specter.
Thank you for your commitment and the commitment of the other
Senators, as well.
I would like to address this, if I could, to Senator
Rockefeller at the outset. We do have a vote at 3:15. What I
think we will try to do is go ahead and go to that vote at the
time and then we will recess for a few minutes until I can get
back and then go to the second panel, because I do not think we
can get nearly through that second panel.
Senator Rockefeller, obviously, there are concerns on
financing of this Act. I think you would have to agree with
that, as well, and probably as one of the supporters of the
Act, you would have to be one who is very concerned about that.
How do you propose to finance this Act, given the recent
Supreme Court ruling and the presentation by the former head of
HCFA that the plan does not have sufficient assets and starts
to run in liability with plan year 2000?
Senator Rockefeller. I would agree with the Chairman, as I
would agree with Senator Conrad, that there are deficiencies
looming and they worry me greatly, as they ought to, because
health care does not come for free. It has to get paid for. One
of the things I think that Senator Conrad, and I agree with him
on this, talked about the Abandoned Mine Reclamation Fund----
Senator Brownback. Start accessing that.
Senator Rockefeller. I have always felt that there is some
reserve there. The Department of the Interior has a reserve
fund which will probably take care of the consequences of the
Eastern ruling. But, as I say, that is not a very large number
of people. My guess, it will turn out between 5,500 and 7,000
retired coal miners out of the total number of 71,000.
In any event, I think that people are a lot more important
than reclamation. If I have to make my choice, it is a very
easy one for me. On the other hand, I also think that we have
the Department of the Interior and others testifying here this
afternoon and I am open. As I said at the beginning, one of my
three tenets is, I will do absolutely anything to protect these
rights of these coal miners who have gone through what
virtually only those who have gone to war go through.
But my third point was that I have always been open for
suggestions for ways of doing this, other ways of doing this or
ways of doing this better, provided that there was no
compromise contemplated on the basic integrity of all of those
miners and their widows, where that is a requirement, would be
protected.
Part of the problem, Mr. Chairman, has been that I have, in
fact, at one or two points have had a bill to give relief to
small companies, but I have not dared bring it up because of
the fact that in the climate which has existed here--please
remember that the Coal Act in the Senate Finance Committee
passed very closely. Now, that was a difference in the Finance
Committee at a different time, but the votes are always very
close. It was by the good graces of Senator David Durenberger
from Minnesota, who voted present and his vote therefore did
not count as a negative vote. That is the way the thing passed.
So we are living here very precariously, which is, indeed,
what gives encouragement to those who want to see all of their
favorite companies get out from underneath these obligations.
So I have never really presented the legislation, although I
want very much to, to protect precisely the small operations
that Senator Conrad talked about because it has been my
fundamental and honest fear that in the case of many, at least,
who were going after this, who were talking about this, that
their real purpose was to unwind the bill, and that I could not
risk.
Senator Brownback. I appreciate your statement in that
regard. Let me make it clear, as I tried to already, that it is
not my purpose to unwind this bill. This is a significant
problem----
Senator Rockefeller. I am not suggesting that, Mr.
Chairman.
Senator Brownback. This is a government oversight hearing
and so we are trying to figure out what it is that we can do,
and I also can appreciate that different people hear things
that are being rumbled about by one group or by another. At the
end of the day, something will have to take place here because
the financing of it may be or may not be impacted by the
Supreme Court ruling. It does impact somewhere, as you know,
between 5,000 and 7,000 mine workers as far as who was paying
in that super-reachback category.
I would ask either you or Senator Conrad briefly if you
could say to me, do you think that the Congress needs to
clarify the Act since the Eastern case, where they have ruled a
certain way in the super-reachback category, or do you think it
is just something that does not need to be addressed, we just
need to figure the financing out on this?
Senator Rockefeller. I am against clarification. I am for
funding, because funding is carried out by the Executive Branch
in coordination with us and is what I call a neutral act of
trying to do the right thing. Clarification has to do with
precisely the basic and very real, and I hope the Chairman
understands that, fear on my part that once you start to
clarify a law that was passed, indeed, as a compromise, as
Senator Conrad indicated, in the compromise that came from the
Bush administration, that once one gets into the clarification
of the language of law, I start to sweat.
Senator Brownback. Senator Conrad.
Senator Conrad. Mr. Chairman, I think you have really
gotten right at the nub of the issue. How can you resolve this
for the long term, one, assuring that the retirees get their
benefits, two, making certain that there is a flow of funds
that assure that, and three, I would put on the agenda,
correcting some of the unfairness and the potential additional
legal challenges to the Act?
The trick has always been, how do you do that without
making the Act vulnerable to what Senator Rockefeller fears,
because make no mistake, there are people who would like to
unravel the thing. I mean, that is just hard reality. So how do
you do that in this legislative environment?
We have on a number of occasions had legislation that was
basically prepackaged, that we all understood that this was
going to be the legislative solution that met all of the goals:
(1) Protect the retiree benefits, (2) correct the unfairness,
and (3) assure the long-term funding. My own belief is it has
to be precooked. You have to go and you have to get agreement
of the relevant players on the House side, you have to get the
agreement of the relevant players on the Senate side, and you
have to get the administration to bless it, and then it has to
move through as an amendment to some other package or
freestanding in a way that everybody agrees that what you start
with is what you end with.
I honestly believe that is the only way to solve this and I
believe that the AML fund offers the best source of funding for
the long-term to assure that the retiree benefits are kept and
that some of the companies are relieved of their
responsibilities because of the Court case and others who are
similarly situated.
Senator Brownback. Senator Specter, do you have any
questions for the panelists?
Senator Specter. I do not.
Senator Brownback. Thank you very much for your
presentations. I do not have any further questions.
Let us go ahead and call our second panel in case that
maybe the vote does not come on up at this time.
Kathy Karpan is the Director of the Office of Surface
Mining Reclamation and Enforcement, Department of the Interior.
Next is Bill Fant, Special Assistant, Office of Tax Policy,
Department of Treasury. Then we have Marilyn O'Connell,
Associate Commissioner, Office of Program Benefits Policy,
Social Security Administration.
[Applause.]
Ms. Karpan, let us go ahead with your presentation. I
appreciate very much you attending here today, and if you would
like to summarize, we can put your full testimony in the
record.
TESTIMONY OF KATHY KARPAN,\1\ DIRECTOR, OFFICE OF SURFACE
MINING RECLAMATION AND ENFORCEMENT, DEPARTMENT OF THE INTERIOR
Ms. Karpan. Thank you, Mr. Chairman. Yes, I would. My name
is Kathy Karpan, I am the Director of the Office of Surface
Mining in the Department of Interior and with me, Mr. Chairman,
seated right behind me, is Bob Ewing, who is the Assistant
Director for Finance and Administration for our agency and is
familiar with the investments and general operation of the
Abandoned Mine Land Fund.
---------------------------------------------------------------------------
\1\ The prepared statement of Ms. Karpan appears in the Appendix on
page 51.
---------------------------------------------------------------------------
Mr. Chairman, we in our Office of Surface Mining administer
the Surface Mining Control and Reclamation Act, which Congress
passed in 1977. Under Title IV of that Act, Congress called for
reclamation of mine land that had been abandoned prior to
passage of the Act. In providing for that cleanup, it created a
reclamation fee and that fee consists of 35 cents a ton for
surface coal mining, 15 cents for underground, and 10 cents for
lignite. That reclamation fee goes into what is called the
Abandoned Mine Land Fund, or what we will call the AML Fund.
Since that fee was created, up until September 30, 1998,
approximately $5 billion has been collected into that fund.
Congress in that same period of time has appropriated
approximately $3.7 billion, and that leaves an unappropriated
balance in that AML fund of $1.3 billion.
We do have an inventory of AML sites, of about 5,000
priority one and priority two sites, that we estimate would
take about $2.6 billion at a minimum to correct.
The fee is destined to expire on September 30, 2004, except
that the fee is authorized to continue in the amount needed to
continue the transfer to the United Mine Workers Combined
Benefit Fund in such amount as would be necessary. To explain
that, in 1992 in the Energy Policy Act, Congress directed that
the interest that OSH earned on its investments could be made
available to the United Mine Workers Combined Benefit Fund. If
I could back up for a second, Mr. Chairman, we did not collect
any interest for our agency or for the fund until beginning in
1992. That was authorized by Congress in 1990.
As the Chairman well knows, the Combined Benefit Fund is
used to pay for the health benefits of former coal mine
employees covered by prior agreements that have been discussed
the previous witnesses. The way it works as a practical matter
is the Social Security Administration has the responsibility
for determining those who are unassigned beneficiaries. That
information is then processed through the trustees of the
United Mine Workers Combined Benefit Fund, and then once a
year, the Combined Benefit Fund will send to our agency, if you
will, a statement indicating the amount of money it expects to
need for the coming year and then we make that money available,
and we do it right around the start of the fiscal year. This
year, it was October 1.
As has been noted earlier, on June 25, 1998, in the U.S.
Supreme Court case of Eastern Enterprises v. Apfel, the Court
did, in effect, add some beneficiaries to the coverage of our
agency and we have made the payment for this year, including
those covered by the Eastern Enterprises decision. On September
25 of this year, the trustees of the Combined Benefit Fund sent
us a request for $81 million. That covered all of their current
needs, adding in Eastern Enterprises, including the adjustments
to date for prior years. Mr. Chairman, I am very pleased to
report, and Senator Rockefeller, that we were able to make that
transfer of money on October 1 of $81 million to the Combined
Benefit Fund.
We also believe that for the short term, Mr. Chairman, we
can continue to meet this need because, fortunately, back
when----
Senator Brownback. Ms. Karpan, I am going to cut in here
because we are going to be going to a vote. To really get right
to the point of this, if you do not mind, for how many years do
you anticipate being able to make the sort----
Ms. Karpan. That was my next paragraph, Mr. Chairman. This
is how long we think we can go. Our interest has been averaging
around $80 million a year right now. With interest rates going
down, it may drop. We would anticipate, if we did not have any
more additions, that we would have to spend about $50 million a
year, somewhere--and these are very rough, rough figures. So if
we used purely the interest income that comes in, if we kept
this universe the same, we would have a surplus and we would be
able to meet it.
Senator Brownback. Indefinitely, then? You are projecting
off of what you currently have?
Ms. Karpan. Mr. Chairman, we do not have enough time to
make a long-term calculation. The increases are such that I am
just telling you for the next few out years, we have only had--
--
Senator Brownback. For the next how many years, would you
anticipate?
Ms. Karpan. Two-thousand-two. But I want to underscore one
thing that I think is important for the Chairman to understand.
When this Combined Benefits Fund was created back in 1992, a
reserve fund was created. Congress directed that we take all of
the interest for fiscal year 1993, 1994, 1995, put it in the
AML Fund, and that AML Fund has been generating interest. There
is now $132.5 million in that reserve fund. We have never had
to resort to that.
So what I am saying to the Chairman, to get to the bottom
line, we could make available all of the interest income, $80
million, plus that $132.5 million to meet the needs for the
short-term future. We would appreciate an opportunity to study
this in greater depth before we are held to any projections in
out years.
Senator Brownback. That is very good. Senator Specter would
like to ask a question if he could before we break here.
Senator Specter. Ms. Karpan, I cannot return after the
break, so I would like to ask you if you have any idea, even an
approximation, as to how much revenue will be lost by those who
will be excluded by virtue of the Supreme Court decision.
Ms. Karpan. You mean how much revenue that we will pick up?
Senator Specter. That you will lose as a result of some
companies being excluded from their obligation by the Supreme
Court decision.
Ms. Karpan. We would say that those covered by the Eastern
Enterprises situation is about 6,600 beneficiaries.
Senator Specter. Sixty-six-hundred beneficiaries?
Ms. Karpan. Yes, sir.
Senator Specter. How much revenue will you lose? They have
paid a certain sum of money to those beneficiaries which will
now have to be covered otherwise. What would the revenue loss
be, income stream loss?
Ms. Karpan. We have already transferred all of the money
that we need for Eastern to catch up with the U.S. Supreme
Court decision with the $81 million.
Senator Specter. You have transferred that money? So you
are making the payments?
Ms. Karpan. Yes, sir. We have covered that decision up to
today.
Senator Specter. And as of this time, although you cannot
project it with precision, as you said, your expectation is to
be able to cover those payments?
Ms. Karpan. For the next couple of years. We have taken
care of all of the Eastern Enterprises companies in our
payment. Now, there may be an adjustment. This periodically
happens.
Senator Specter. So all the beneficiaries are currently
being covered by that adjustment?
Ms. Karpan. Yes, sir. We have sent enough money and we
believe that there is more than adequate money to cover the
next year or two.
Senator Specter. That is very important. Thank you very
much, Mr. Chairman.
Senator Brownback. Ms. O'Connell, let us go ahead and get a
few minutes of your testimony in before we have to rush off.
Thank you for joining us.
TESTIMONY OF MARILYN O'CONNELL,\1\ ASSOCIATE COMMISSIONER,
OFFICE OF PROGRAM BENEFITS POLICY, SOCIAL SECURITY
ADMINISTRATION
Ms. O'Connell. I am Marilyn O'Connell from the Social
Security Administration. The previous witnesses have described
what the Coal Act is for and what it does.
---------------------------------------------------------------------------
\1\ The prepared statement of Ms. O'Connell appears in the Appendix
on page 57.
---------------------------------------------------------------------------
Social Security was given three responsibilities under the
Coal Act. One of these was to calculate the health benefit
premium for each beneficiary and provide that to the fund. The
second responsibility is to assign each miner to a coal
operator who will be responsible for the health and death
benefit premium for the beneficiaries related to that miner and
notify the operators and the fund of those assignments, and
finally, to decide requests by the coal operators for review of
those assignments.
Social Security has calculated the premium timely each year
since the beginning of the Coal Act and notified the trustees,
and we made the original assignments timely, which was October
1, 1993. Since that time, we have been working on the third
responsibility, which turned out to be extremely complex, and
that was to review each of the individual assignments if the
operators requested it.
The law provides that an assigned operator may, within 30
days of receipt of the assignment notice, request detailed
information about the miner's work history and the basis for
the assignment. The assigned operator then has 30 days from
receipt of that additional information to request review of the
assignment.
Since the start of our work on the Coal Act, we have
reviewed assignments for approximately 665 coal operators
concerning the assignments of 36,256 miners. The miner count
includes some duplicates because we got appeals on the same
miner more than once, and the coal operator count includes many
companies relieved of assignment responsibilities. As of today,
we have assignments to 399 coal operators.
Senator Brownback. Ms. O'Connell, if I could, I am sorry to
interrupt, but I would like to have the rest of your testimony
in on the record so we will be able to have that.
Ms. O'Connell. We will submit it for the record.
Senator Brownback. Does the Social Security Administration
anticipate a need for Coal Act reform to ensure the fund's
solvency? Are you anticipating that?
Ms. O'Connell. Actually, the Social Security Administration
has played a role almost as contractor, in that SSA simply
assigns the miners to the companies.
Senator Brownback. So you have not made those
determinations of funds----
Ms. O'Connell. SSA was charged with the assignment either
to a company or to the unassigned fund, which would be covered
by the Department of the Interior. The issue of fund solvency
rests with the Department of the Interior.
Senator Brownback. If I could ask both of you, because I am
going to have to leave for a vote just momentarily, I am very
concerned about the ability to be able to finance this over a
period of some time. I was pleased by your comments, Ms.
Karpan, that you feel like you are in fine shape through 2002
so that perhaps the window is longer than what was anticipated
by the former actuary for HCFA when he made his comments by the
year 2000.
I would like for you to, if you could, present in writing
to this Subcommittee your projections for financing that you
can handle, given the Eastern case that the Supreme Court ruled
and the nearly 250 companies, the 5,000 to 7,000 mine workers
that would not be covered now of a fund flow under the super-
reachback companies that have now been declared
unconstitutional reachback. How long can we go under the
current system that we have? I would appreciate that submitted,
if you could, in writing so that we could go back through that.
If the Social Security Administration has any input on
that, as well, I would appreciate being able to have it, but it
sounds like most of that is just conceded to the Department of
the Interior----
Ms. O'Connell. It really is.
Senator Brownback [continuing]. And that is fine. I just
want to make sure if you have something that you want us to
hear about, either on that or on the need to change this Act to
be able to continue it, I would like to be able to have that to
put forward.
Nothing is going to be taking place this Congress. Nobody
is trying to take anybody's benefits. I want to reiterate and
underline that three times. What we are talking about here is
the ability to be able to finance these, given the recent
Supreme Court rulings and the things that have taken place. So
if you could help us out with that, that would be most
appreciated.
Ms. Karpan. Mr. Chairman, if I could just clarify one
point, I would not want to mislead you. I will take a minute.
All of my comments have been directed to interest on the
Abandoned Mine Land Fund. I think the idea has always been that
that principal was there to clean up the land, but the interest
income could appropriately be used for these purposes. So when
I have talked about the interest on the fund being available to
meet the needs, it is there. The $132.5 million is there, and
that is my projection out to 2002. It is just on the interest
income.
Senator Brownback. Good. Thank you very much. I would like
to keep the record open for 3 days for you to submit further
information and I would also like for you to submit back in
writing to the Subcommittee the answers to these questions.
I would like to enter into the record a written statement
from Deborah Walker, Acting Deputy to the Benefits Tax Counsel
at the Treasury Department.\1\
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\1\ The prepared statement of Ms. Walker appears in the Appendix on
page 64.
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I would also like to enter into the record a letter from
Cynthia Fagnoni, Director, Income Security Issues, U.S. General
Accounting Office, regarding the status of the UMWA Combined
Benefit Fund.\2\
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\2\ The letter from Ms. Fagnoni appears in the Appendix on page 69.
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I want to thank you for coming and I want to thank the
patience of the people here for participating in this hearing.
It is a very important issue. It affects people's lives
directly. We want to make sure we continue to be able to do so
in a constitutional fashion. Thanks for joining us. God bless
you all.
The hearing is adjourned.
[Whereupon, at 3:26 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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PREPARED STATEMENT OF SENATOR THAD COCHRAN
Mr. Chairman, thank you for calling this very important hearing and
allowing me the opportunity to make a few comments in support of
congressional reform of the Coal Industry Retiree Health Benefits Act
of 1992.
I am gratified that your Subcommittee is willing to bring some
needed oversight to the implementation of the Coal Act that has
affected people and companies all over the country, including some in
my State of Mississippi.
Mr. Chairman, simply stated, the 1992 Coal Act's Reachback Tax has
compelled individuals or companies to pay health care benefits for
retired union coal miners and their dependents--regardless of whether
these companies actually signed contracts promising these benefits.
This prompted my colleagues and me to introduce legislation in July
of 1997 to mitigate the inequities associated with the retroactive tax
provisions of the Coal Act. Our legislation would ensure the solvency
of the Combined Benefit Fund established by the Coal Act and will
guarantee retiree health care benefits to approximately 74,000 retired
unionized bituminous coal miners, their spouses or widows, and
dependents.
Since our bill's introduction, the U.S. Supreme Court ruled in June
of this year that the 1992 Coal Act violated both the takings and due
process amendments of the constitution in Eastern Enterprises v. Apfel.
The Court concluded that the Constitution does not grant Congress the
ability to reach back over the decades and assess taxes, whether on
individuals or companies, simply because they had been party to an
expired contract.
While the ruling was limited to the liability of Eastern
Enterprises, the Court's decision clearly has significant implications
for other companies who have been charged with millions of dollars of
retroactive liability. In fact, last week the Social Security
Administration notified 149 Reachback companies that they are no longer
responsible for payments under the Coal Act.
While retiree health benefits must be maintained, the companies
that actually promised lifetime health care benefits to retired miners
must be made responsible for payments not the companies that have no
contractual obligation and never made such promises.
Thank you again, Mr. Chairman, for calling this hearing and for
focusing such badly needed oversight on this issue.
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