[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




   STRENGTHENING THE MULTIEMPLOYER PENSION SYSTEM: HOW WILL PROPOSED 
                                REFORMS
                AFFECT EMPLOYERS, WORKERS, AND RETIREES?

=======================================================================


                                HEARING

                               before the

                        SUBCOMMITTEE ON HEALTH,
                        
                    EMPLOYMENT, LABOR, AND PENSIONS

                         COMMITTEE ON EDUCATION
                         
                           AND THE WORKFORCE

                     U.S. House of Representatives

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, OCTOBER 29, 2013

                               __________

                           Serial No. 113-35

                               __________

  Printed for the use of the Committee on Education and the Workforce


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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Tom Price, Georgia                   Ruben Hinojosa, Texas
Kenny Marchant, Texas                Carolyn McCarthy, New York
Duncan Hunter, California            John F. Tierney, Massachusetts
David P. Roe, Tennessee              Rush Holt, New Jersey
Glenn Thompson, Pennsylvania         Susan A. Davis, California
Tim Walberg, Michigan                Raul M. Grijalva, Arizona
Matt Salmon, Arizona                 Timothy H. Bishop, New York
Brett Guthrie, Kentucky              David Loebsack, Iowa
Scott DesJarlais, Tennessee          Joe Courtney, Connecticut
Todd Rokita, Indiana                 Marcia L. Fudge, Ohio
Larry Bucshon, Indiana               Jared Polis, Colorado
Trey Gowdy, South Carolina           Gregorio Kilili Camacho Sablan,
Lou Barletta, Pennsylvania             Northern Mariana Islands
Martha Roby, Alabama                 John A. Yarmuth, Kentucky
Joseph J. Heck, Nevada               Frederica S. Wilson, Florida
Susan W. Brooks, Indiana             Suzanne Bonamici, Oregon
Richard Hudson, North Carolina
Luke Messer, Indiana

                    Juliane Sullivan, Staff Director
                 Jody Calemine, Minority Staff Director
                                 ------                                

        SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS

                   DAVID P. ROE, Tennessee, Chairman

Joe Wilson, South Carolina           Robert E. Andrews, New Jersey,
Tom Price, Georgia                     Ranking Member
Kenny Marchant, Texas                Rush Holt, New Jersey
Matt Salmon, Arizona                 David Loebsack, Iowa
Brett Guthrie, Kentucky              Robert C. ``Bobby'' Scott, 
Scott DesJarlais, Tennessee              Virginia
Larry Bucshon, Indiana               Ruben Hinojosa, Texas
Trey Gowdy, South Carolina           John F. Tierney, Massachusetts
Lou Barletta, Pennsylvania           Raul M. Grijalva, Arizona
Martha Roby, Alabama                 Joe Courtney, Connecticut
Joseph J. Heck, Nevada               Jared Polis, Colorado
Susan W. Brooks, Indiana             John A. Yarmuth, Kentucky
Luke Messer, Indiana                 Frederica S. Wilson, Florida

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on October 29, 2013.................................     1

Statement of Members:
    Roe, Hon. David P., Chairman, Subcommittee on Health, 
      Employment, Labor and Pensions.............................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Certner, David, Legislative Counsel and Legislative Policy 
      Director, AARP Government Affairs..........................    15
        Prepared statement of....................................    17
    Duncan, Carol, Chief Executive Officer, General Sheet Metal..     6
        Prepared statement of....................................     8
    McGarver, Sean, President, North America's Trades Unions.....    30
        Prepared statement of....................................    32
    Nyhan, Thomas, C., Executive Director and General Counsel, 
      Central States Southeast Areas Pension Fund................    42
        Prepared statement of....................................    44
Additional Submissions:
    Andrews, Hon. Robert, E., Ranking Member, Subcommittee on 
      Health, Employment, Labor, and Pensions, submitted for the 
      record:
        Prepared statement of The International Brotherhood of 
          Boilermakers, Iron Ship Builders, Blacksmiths, Forgers 
          & Helpers..............................................    78
        Prepared statement of The International Association of 
          Machinists and Aerospace Workers.......................    59
        Prepared statement of Paul Host, Teamsters for Democratic 
          Unions.................................................    65
    Scott, Hon. Robert C. ``Bobby'', a Representative in Congress 
      from the State of Virginia submitted for the record:
        Prepared statement of The United Steel, Paper and 
          Forestry, Rubber, Manufacturing, Energy, Allied 
          Industrial and Service Workers International Union.....    95
        Prepared statement of The United Steel, Paper and 
          Forestry, Rubber, Manufacturing, Energy, Allied 
          Industrial and Service Workers International Union.....   101

                                Appendix

    Andrews, Hon. Robert, E., Ranking Member, a Representative in 
      Congress from the State of New Jersey, prepared statement 
      of The Pension Rights Center...............................   112
    Barletta, Hon. Lou, a Representative in Congress from the 
      State of Pennsylvania, prepared statement of The National 
      Electrical Contractors Association.........................   116
    Scott, Hon. Robert C. ``Bobby'', a Representative in Congress 
      from the State of Virginia, letter dated October 28, 2013 
      from General President James P. Hoffa, International 
      Brotherhood of Teamsters...................................   123

 
                   STRENGTHENING THE MULTIEMPLOYER
                   
                   PENSION SYSTEM: HOW WILL PROPOSED


            REFORMS AFFECT EMPLOYERS, WORKERS, AND RETIREES?

                       Tuesday, October 29, 2013

                       House of Representatives,

         Subcommittee on Health, Employment, Labor and Pensions

               Committee on Education and the Workforce,

                            Washington, D.C.

    The subcommittee met, pursuant to call, at 10:02 a.m., in 
Room 2175, Rayburn House Office Building, Hon. David P. Roe 
[chairman of the subcommittee] presiding.
    Present: Representatives Roe, Wilson, Salmon, Guthrie, 
DesJarlais, Bucshon, Gowdy, Roby, Heck, Messer, Andrews, Holt, 
Loebsack, Scott, Hinojosa, Tierney, Courtney, and Wilson.
    Also present: Representatives Kline and Miller.
    Staff present: Andrew Banducci, Professional Staff Member; 
Janelle Belland, Coalitions and Members Services Coordinator; 
Owen Caine, Legislative Assistant; Molly Conway, Professional 
Staff Member; Ed Gilroy, Director of Workforce Policy; Benjamin 
Hoog, Senior Legislative Assistant; Nancy Locke, Chief Clerk; 
Brian Newell, Deputy Communications Director; Krisann Pearce, 
General Counsel; Jenny Prescott, Staff Assistant; Nicole 
Sizemore, Deputy Press Secretary; Alissa Strawcutter, Deputy 
Clerk; Juliane Sullivan, Staff Director; Alexa Turner, Staff 
Assistant; Aaron Albright, Minority Communications Director for 
Labor; Tylease Alli, Minority Clerk/Intern and Fellow 
Coordinator; Jody Calemine, Minority Staff Director; Daniel 
Foster, Minority Fellow, Labor; Melissa Greenberg, Minority 
Staff Assistant; Eunice Ikene, Minority Staff Assistant; Megan 
O'Reilly, Minority General Counsel; Michele Varnhagen, Minority 
Chief Policy Advisor/Labor Policy Director; and Mark Zuckerman, 
Minority Senior Economic Advisor.
    Chairman Roe. A quorum being present, the Subcommittee on 
Health, Employment, Labor and Pensions will come to order.
    Good morning, everyone. I would like to welcome our guests 
and thank our witnesses for being with us today.
    The topic of this hearing personally affects many in our 
audience--men and women who have spent a lifetime in the 
workplace and hope to enjoy retirement with the financial 
security they were promised. Unfortunately, that security is 
now in jeopardy for a number of different reasons.
    For example, the recent recession and the sluggish economy 
continue to threaten the multiemployer pension system and the 
retirement savings of many Americans. Flawed government 
policies have also had a hand in the current crisis we face, 
making it difficult for the trustees of these pension plans to 
prepare during the good times for the difficult times we are in 
now.
    I expect our witnesses will describe in greater detail the 
challenges facing the multiemployer pension system and how we 
have ended up with nearly 400 billion in unfunded benefit 
liabilities, a Pension Benefit Guaranty Corporation on the 
brink of insolvency, and employers stretched thin by current 
pension obligations, and both workers and retirees fearful they 
will lose what they worked so hard to achieve.
    For more than a year this subcommittee has been closely 
examining this difficult issue. During that time two things 
have become abundantly clear.
    First, the pain inflicted on workers and retirees will be 
far greater if we fail to act in the coming months. A number of 
multiemployer plans are regaining their financial health. We 
certainly welcome that progress and hope it continues; however, 
we cannot lose sight of the sizeable number of large plans that 
remain in financial distress.
    Pension plans that include hundreds of thousands of workers 
will become insolvent unless they receive the tools necessary 
to change course. If they don't, it is impossible to predict 
with any certainly how far the consequences will spread.
    We have discussed in previous hearings a domino effect that 
would undermine not just the strength of the individual pension 
plans but the pension system as a whole. PBGC will become 
overwhelmed and unable to provide the federal backstop it has 
delivered for nearly 40 years, which means some retirees will 
be left with nothing.
    We must also be mindful that employers will be harmed under 
this nightmare scenario as well. Improving the multiemployer 
pension system is not only about retirement security; it is 
about saving jobs and protecting the competitiveness of 
America's workplaces. As elected policymakers we have a 
responsibility to take action and help prevent the worst from 
happening.
    It has also become clear that there are no easy answers, 
despite what some may suggest. Our goal is to strengthen the 
multiemployer pensions.
    Part of that effort must include finding ways to encourage 
new employers to join the system. Raising contributions and 
premiums to punitive levels will undermine this important goal. 
In fact, I fear it will destroy jobs and drive even more 
employers out of the system, exacerbating the problems that 
already exist.
    We need to find a better way forward. While we face 
significant challenges, I am hopeful we can enact meaningful 
solutions before it is too late.
    Members of the labor and management communities have united 
behind a comprehensive proposal to reform the multiemployer 
pension system. Their work has been vital to this debate and 
encouraged members on both sides of the aisle.
    I have also had a number of positive conversations with the 
senior Democratic member of the subcommittee, Representative 
Rob Andrews. We share a commitment to working together and 
making the tough choices that are necessary. America's workers, 
employers, and retirees deserve no less.
    I know this is extremely difficult for every man and woman 
involved. Promises were made and lives were planned believing 
those promises would be kept. I cannot fathom the anxiety and 
frustration you must feel, but I hope you will work with us, 
not against us, as we try to preserve the multiemployer 
pensions you and millions of Americans rely upon.
    I will now recognize my colleague, Mr. Andrews, for his 
opening remarks?
    [The statement of Chairman Roe follows:]

Prepared Statement of Hon. Phil Roe, Chairman, Subcommittee on Health, 
                    Employment, Labor, and Pensions

    Good morning, everyone. I'd like to welcome to our guests and thank 
our witnesses for being with us today.
    The topic of this hearing personally affects many in our audience, 
men and women who have spent a lifetime in the workplace and hope to 
enjoy retirement with the financial security they were promised. 
Unfortunately, that security is now in jeopardy for a number of 
different reasons.
    For example, the recent recession and a sluggish economy continue 
to threaten the multiemployer pension system and the retirement savings 
of many Americans. Flawed government policies have also had a hand in 
the current crisis we face, making it difficult for the trustees of 
these pension plans to prepare during the good times for the difficult 
times we are now in.
    I expect our witnesses will describe in greater detail the 
challenges facing the multiemployer pension system and how we have 
ended up with nearly 400 billion in unfunded benefit liabilities, a 
Pension Benefit Guaranty Corporation on the brink of insolvency, 
employers stretched thin by current pension obligations, and both 
workers and retirees fearful they will lose what they worked so hard to 
achieve.
    For more than a year the subcommittee has been closely examining 
this difficult issue. During that time two things have become 
abundantly clear.
    First, the pain inflicted on workers and retirees will be far 
greater if we fail to act in the coming months. A number of 
multiemployer plans are regaining their financial health. We certainly 
welcome that progress and hope it continues. However, we cannot lose 
sight of the sizeable number of large plans that remain in financial 
trouble.
    Pension plans that include hundreds of thousands of workers will 
become insolvent unless they receive the tools necessary to change 
course. If they don't, it is impossible to predict with any certainty 
how far the consequences will spread. We've discussed in previous 
hearings a domino effect that would undermine not just the strength of 
the individual pension plans, but the pension system as a whole. PBGC 
will become overwhelmed and unable to provide the federal backstop it 
has delivered for nearly 40 years, which means some retirees will be 
left with nothing.
    We must also be mindful that employers will be harmed under this 
nightmare scenario as well. Improving the multiemployer pension system 
is not only about retirement security; it's about saving jobs and 
protecting the competitiveness of America's workplaces. As elected 
policymakers, we have a responsibility to take action and help prevent 
the worst from happening.
    It has also become clear that there are no easy answers, despite 
what some may suggest. Our goal is to strengthen multiemployer 
pensions. Part of that effort must include finding ways to encourage 
new employers to join the system. Raising contributions and premiums to 
punitive levels will undermine this important goal. In fact, I fear it 
will destroy jobs and drive even more employers out of the system, 
exacerbating the problems that already exist.
    We need to find a better way forward. While we face significant 
challenges, I am hopeful we can enact meaningful solutions before it's 
too late. Members from the labor and management communities have united 
behind a comprehensive proposal to reform the multiemployer pension 
system. Their work has been vital to this debate and encouraged members 
on both sides of the aisle.
    I've also had a number of positive conversations with the senior 
Democratic member of the subcommittee, Representative Rob Andrews. We 
share a commitment to working together and making the tough choices 
that are necessary. America's workers, employers, and retirees deserve 
no less.
    I know this is extremely difficult for every man and woman 
involved. Promises were made and lives were planned believing those 
promises would be kept. I cannot fathom the anxiety and frustration you 
must feel, but I hope you will work with us_not against us_was we try 
to preserve the multiemployer pensions you and millions of Americans 
rely upon. I will now recognize my colleague Mr. Andrews for his 
opening remarks.
                                 ______
                                 
    Mr. Andrews. I thank you, Mr. Chairman. I thank you for 
your continued courtesy and cooperation and thank the witnesses 
for giving us their time this morning.
    Almost everything we do around here every day is about 
politics. We spend an enormous amount of time, particularly the 
last 5 weeks, trying to say who is responsible for this problem 
and that problem and one side try to gain the advantage over 
the other.
    This is one of the few things we are doing around here that 
is not about politics. The easy political thing to do here is 
for the two sides to square off and accuse each other of 
wanting to cut the pensions of hardworking Americans.
    It is very tempting; it is very easy; it is very wrong. It 
is very wrong.
    The harder thing to do is to work together to try to fix 
this problem. What is this problem?
    Well, as I see it, this problem is about someone who worked 
very hard his or her whole life wiring up schools, or driving a 
truck, or cutting meat in a supermarket, or building houses, or 
working in a chemical plant; someone who has worked very hard 
for his or her whole life and they are counting on the fact 
that the pension they were promised will be there for the rest 
of their life, and if provided for, it will be there for their 
spouse and their survivors.
    That promise is in jeopardy today, not because anybody 
wants it to be; not because, in my opinion, because people have 
mismanaged. I think there have been some mismanaged funds but I 
think by and large this is not a problem of mismanagement. It 
is a problem of a horrendous economic situation that crested in 
2008, about 5 years ago.
    People stopped building houses. They stopped building 
convenience stores and schools.
    They stopped buying goods that are trucked over the 
country's roads. And as those things happened jobs bled out of 
the economy, profits bled out of employers, and we got 
ourselves to a situation where the amount of money being paid 
into those pension funds in many cases was insufficient to 
cover the benefits that are being paid out and that will be 
paid out in the future. That is the problem.
    There is a harsh reality that if--if something is not done 
for some of those plans--some, not all--that we will reach a 
day when the plans will cease to exist and they will be turned 
over to the Pension Benefit Guaranty Corporation. What that 
generally means, not always, but what it generally means is a 
60 percent benefit cut for people who are receiving pensions. 
Sixty percent.
    That is what we are here to avoid today. That is what we 
need to work together to accomplish.
    And I am pleased that we have four dedicated, sincere, able 
individuals here to talk to us this morning about their ideas. 
Later we will be putting some statements in the record from 
others who are not physically present to testify but who have 
things to say about this. And we will be working together to 
try to find ways to address this problem.
    If we want to do the politics of this it is pretty simple: 
We will take a position, the other side will take a position, 
and nothing will happen. Nothing. And it is my sense that if 
that happens a lot of innocent people who worked hard their 
whole lives will lose an enormous amount of their pensions.
    We are not going to let that happen. We are going to do the 
best we can to work together to find a fair, reasonable 
solution, and I hope this morning contributes to that.
    Thank you.
    Chairman Roe. I thank the gentleman for yielding.
    Pursuant to committee rule 7(c), all members will be 
permitted to submit written statements to be included in the 
permanent hearing record, and without objection the hearing 
record will remain open for 14 days to allow such statements 
and other extraneous materials referenced during the hearing to 
be submitted for the official hearing record.
    It is now my pleasure to introduce our distinguished panel 
of witnesses.
    First, Ms. Carol Duncan--thank you for coming all the way 
across the country--is the owner and president of General Sheet 
Metal Incorporated in Clackamas, Oregon. Ms. Duncan is also 
testifying on behalf of Sheet Metal and Air Conditioning 
Contractors' National Association.
    Welcome.
    Mr. David Certner is the legislative counsel and director 
of legislative policy for government affairs for AARP in 
Washington, D.C. He serves as counsel for the association's 
legislative, regulatory, litigation, and policy efforts.
    Welcome, Mr. Certner.
    Mr. Sean McGarvey is the president of the building and 
construction trades department of the AFL-CIO in Washington, 
D.C. He also serves as the chairman of the board of directors 
for the National Coordinating Committee for Multiemployer 
Plans.
    And welcome, Mr. McGarvey.
    Mr. Tom Nyhan is the executive director and general counsel 
of the Central States Southeast and Southwest Areas Pension 
Funds, headquartered in Rosemont, Illinois. The pension covers 
more than 416,000 plan participants.
    Before I recognize you to provide your testimony let me 
briefly explain our lighting system.
    You have 5 minutes to present your testimony. When you 
begin the light in front of you will turn green; when 1 minute 
is left the light will turn yellow; when you time is expired 
the light will turn red. At that point I will ask you to wrap 
up your testimony as best you can.
    After everyone has testified members will each have 5 
minutes to ask questions.
    I will now begin with Ms. Duncan?

 STATEMENT OF MS. CAROL DUNCAN, PRESIDENT, GENERAL SHEET METAL 
                    WORKS, CLACKAMAS, OREGON

    Mr. Duncan. Thank you, Chairman Roe, and Ranking Member 
Andrews, and members of the subcommittee, for holding this 
hearing. I truly appreciate your bipartisan efforts.
    My name is Carol Duncan. I am the CEO and president of 
General Sheet Metal out of Clackamas, Oregon. We are a small 
business, employing between 60 and 100 craftspeople. We perform 
both public and private work in several divisions, including 
mechanical, architectural, and manufacturing.
    I am pleased to be here today representing SMACNA and my 
company.
    General Sheet Metal was founded in 1932 and purchased by my 
father and my uncle in 1972. I started with the company when I 
was 21 and recently purchased my father out, becoming the sole 
owner.
    I would also like to mention my brothers own a roofing 
company and contribute to two defined contribution plans, also. 
My husband worked 47 years in the construction industry and now 
draws his retirement from two construction industry plans.
    My daughter, who just finished college, worked for me 
during the summers and is interested in becoming a third 
general family business owner. However, unless something is 
done to address the unfunded pension liability, I am not sure 
that is the best advice a mother could give.
    My company pays into two defined pension benefit plans--a 
national plan in critical status and a local plan in green 
status but with $178 million unfunded vested benefits. That 
might be more than all the value of all the contributing 
contractors in the plan.
    My recent contributions totaled $1.5 million to our local 
plan and over 500,000 to our national plan. Yet, we are liable 
for contributions far beyond that.
    General Sheet Metal's contributions to the national plan in 
2011 were 149,000, but my withdrawal liability for that year 
alone increased by 280,000--almost double my contributions. As 
withdrawal liability grows, it can outpace the value of a 
company, especially in small, family-owned businesses.
    Employers keep making higher contributions every year but 
the hole keeps getting deeper. It is important to know that the 
employees are doing their part, too. They have agreed to lower 
accrual rates. Some have taken new funding increases out of 
their paychecks to help the contractors stay more competitive. 
But this alone hasn't done it.
    I run a successful business, but unfunded pension liability 
results in an uncontrollable uncertainty that affects my major 
business decisions every day. For example, negotiating with my 
banker or my surety for increasing operating lines or bonding 
capacity requires me to educate them on this issue, and I can 
tell you firsthand that no matter how much I explain or educate 
them their discomfort with my company not being able to 
realize--their discomfort with the unfunded liability holds my 
company back from realizing its full potential.
    It would be hard if not impossible to sell my company 
because of the pension liabilities. And although I have key 
employees who expressed an interest in becoming part owners, 
even they may not be willing to invest, given the risk and 
uncertainty of the pension liabilities.
    In the 1990s, when the economy and the stock market were 
booming, our local plan exceeded 100 percent funding. Back 
then, tax law prevented the plans from building reserves, so 
benefits were increased. Congress addressed the overfunding 
issue, but those benefit improvements cannot be changed and now 
they are part of the plan's unfunded liabilities.
    As we look for solutions we must stop digging the hole; and 
we are focused on more stable models for the future. Oregon 
Business Magazine rated GSM as one of Oregon's top companies to 
work for in 2010 and 2012, and it gives me great satisfaction 
to provide our employees quality wages, health care for their 
families, and a secure retirement that many others don't.
    Therefore, I am interested in new plan designs that would 
offer the best characteristics of the defined-benefit plan but 
would not expose my business to additional pension liabilities. 
Employers can't continue to be the backup for stock market 
performance, nor can we be dependent on the volatility of other 
employers in the plan.
    I, along with SMACNA, support the Solutions Not Bailout 
proposal developed over 18 months with both labor and 
management working together. We are not asking for taxpayer 
bailout. It is a self-help plan for plans, and also relieving 
the stress on the PBGC.
    Let me finish by saying when a mother has second thoughts 
about turning over her business to her daughter and when 
unfunded pension liabilities overshadow the value of a company, 
something is wrong.
    Thank you, and I would be happy to answer any questions.
    [The statement of Ms. Duncan follows:]
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                                ------                                

    Chairman Roe. Thank you, Ms. Duncan.
    Mr. Certner?

    STATEMENT OF MR. DAVID CERTNER, LEGISLATIVE COUNSEL AND 
     LEGISLATIVE POLICY DIRECTOR, AARP GOVERNMENT AFFAIRS, 
                        WASHINGTON, D.C.

    Mr. Certner. Mr. Chairman, Mr. Andrews, and members of the 
committee, I am David Certner, legislative counsel for AARP. 
And thank you for inviting us to testify today. We appreciate 
the opportunity to share our views on steps to strengthen 
multiemployer pension plans.
    AARP recognizes the effort put forward by NCCMP in its 
Solutions Not Bailout report to address the potential 
insolvency of some deeply troubled plans. Under insolvency, 
participants would only receive a very low insurance amount 
from the PBGC. AARP agrees that doing nothing in the face of 
this problem is not a viable option.
    However, the centerpiece of the NCCMP plan is a proposal to 
give multiemployer plans the legal authority to drastically cut 
the pension benefits of current retirees to as little as 110 
percent of the PBGC insurance levels. AARP has concerns with 
several aspects of the plan but we are most alarmed at the 
proposal to grant plan trustees broad discretion to cut accrued 
benefits for participants, including the unprecedented step of 
reducing the pension benefits of retirees already receiving and 
living on their pensions. Not surprisingly, AARP strongly 
objects to this proposal.
    This would mean an 80-year-old retiree with 1,000-a-month 
pension could lose more than one full month's worth of income 
every year. A retiree with a modest $24,000-a-year pension, or 
$2,000 a month, could see a whopping 41 percent cut, to about 
1,180 a month. That is a recipe for drastically reducing the 
living standards of a median-income retiree to an income barely 
above the poverty level.
    The simple question is this: How exactly are these retirees 
expected to make up that lost income? The NCCMP report attempts 
to preserve defined-benefit retirement security, but security 
is illusory if your benefits can be cut after you have already 
retired. Far from boosting confidence in the plan, the broken 
promises to retirees would damage workers' trust they will 
collect their own pension when they retire.
    Proponents fear potential insolvency. However, this is not 
by itself a sufficient argument for cutting retiree benefits 
and upending ERISA protections.
    If ERISA stands for anything, it stands for the proposition 
that already-accrued benefits cannot be reduced. The anti-
cutback rule is perhaps the most fundamental of ERISA's 
protections. Accordingly, we must explore alternatives and 
focus on strategies that increase the PBGC's capacity to assist 
plans and protect participants.
    We urge the committee to explore different approaches, 
spelled out in greater detail in our written statement, 
including the following: One, require steps plans can take now. 
The Pension Protection Act permits distressed plans to cut 
adjustable benefits but this has not always happened. Plans in 
critical status should be required to take all steps currently 
available before any other cuts to accrued benefits are every 
considered.
    Two, enhance the ability of the PBGC to assist troubled 
plans. If the PBGC had the authority and financial resources to 
step in sooner with more tools at its disposal it could help 
stave off insolvency, minimize participant losses, and mitigate 
its own liabilities. Our written statement suggests potential 
ways to use plan mergers, alliances, and partition to leverage 
support from healthy plans.
    Three, increase funds for the PBGC. Premiums are currently 
set at the low level of 12 per year per participant--inadequate 
to cover the PBGC's liabilities--and with insurance levels that 
are too low to provide retirement security. Improving the 
PBGC's capacity to handle its liabilities, intervene to assist 
plans, and to provide greater insurance protection should be a 
shared responsibility among healthy plans, employers, 
participants, and Congress.
    And fourth, increase revenue for the plans. Congress has 
provided long-term loan assistance to some industries that have 
been decimated by the financial crisis. Similar federal 
financial assistance, such as low-interest loans, should be an 
option here as well.
    Permitting retiree benefit cuts is bad enough, but to 
propose standards for making the cuts are deeply flawed and, 
quite frankly, unfair. Our written statement contains a 
detailed critique, but in short, the due diligence standards 
are heavily biased towards cutting retirees with inherent 
conflicts of interest.
    Retirees have no meaningful voice throughout the process. 
The PBGC's scope of review is really more like a rubber stamp, 
and there are few details on how to protect retirees, mitigate 
the harshness of the cuts, or protect vulnerable populations. 
When the median multiemployer pension benefit received by 
retirees is only about $8,300 a year, AARP would contend that 
most retirees will qualify as ``vulnerable.''
    And in closing, AARP simply rejects the premise that 
cutting retiree benefits is an imperative, and we advocate 
instead the adoption of alternative approaches.
    Again, thank you, and I would be happy to answer any 
questions you may have.
    [The statement of Mr. Certner follows:]
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                                ------                                

    Chairman Roe. I thank you, Mr. Certner.
    Mr. McGarvey, you are recognized?

    STATEMENT OF MR. SEAN MCGARVEY, PRESIDENT, BUILDING AND 
   CONSTRUCTION TRADES DEPARTMENT, AFL-CIO, WASHINGTON, D.C.

    Mr. McGarvey. Good morning, Mr. Chairman, Mr. Andrews, and 
members of the subcommittee. My name is Sean McGarvey, and I am 
the president of North America's Building Trades Unions. And I 
apologize--I am a little under the weather today--if I have to 
stop to blow my nose or something.
    We are an alliance of 13 national and international unions 
that collectively represent over 2 million skilled craft 
professionals in the United States and Canada. Due to the 
nature of the construction industry, whereby the vast majority 
of our members move from project to project and from employer 
to employer, our health and benefit plans are structured under 
what are known as multiemployer plans.
    Multiemployer plans have been providing retirement security 
to tens of millions of Americans for over 60 years. 
Traditionally such plans have been conservatively managed and 
well funded. In fact, over the 35-year history of the Pension 
Benefit Guaranty Corporation, over 74 multiemployer plans ever 
received financial assistance from the agency. As recently as 
2007, over 75 percent of multiemployer funds were more than 80 
percent funded.
    However, the investment losses incurred as a result of the 
2008 global financial disaster now threaten the financial 
viability of a small but significant minority of multiemployer 
plans. In addition, the impending sunset of multiemployer 
funding provisions of the Pension Protection Act of 2006 
presents an opportunity for more fundamental restructuring of 
some of the basic precepts of ERISA law in order to reduce or 
eliminate the drastic financial risks being incurred by 
contributing employers.
    This restructuring, including the elimination of withdrawal 
liability for future service, would remove many of the 
disincentives to retaining current contributing employers while 
providing an opportunity to attract new contributors, thereby 
strengthening the long-term financial health of such plans for 
both the current and future generations. The multiemployer 
world solutions to address unfunded liabilities, such as 
increased contributions, can also boost an employer's potential 
exposure to withdrawal liability because the higher a 
contribution rate results in a higher assessment rate for 
withdrawal liability.
    Another risk occurs when an employer goes bankrupt and the 
employer's liabilities cannot be collected. This adds to the 
cost of the remaining employers in the plan who become 
understandably nervous about their fellow employers' financial 
health.
    Withdrawal liability was designed to discourage employers 
from leaving the plans, but because of the more stringent 
funding rules imposed by the PPA, it is now having an opposite 
and perverse effect whereby some employers will be able to 
avoid even greater future exposure by paying their current 
withdrawal liability and leaving the plan rather than improving 
the funding of the plan by continuing their contributions.
    So in order to protect multiemployer retirement security 
and to avoid any semblance of taxpayer bailout, labor and 
management in the construction industry have worked hand in 
hand to formulate a reasonable and workable package of 
solutions. Through the offices of the National Coordinating 
Committee for Multiemployer Plans, we formed the Retirement 
Security Review Commission.
    This commission involved the participation of dozens of 
representatives of over 40 labor and employer associations, 
multiemployer plans, and large employers. The resulting set of 
recommendations is contained in the report titled ``Solutions 
Not Bailouts.''
    The commission was driven by two primary objectives: one, 
that any recommendations for change to the existing system of 
multiemployer plans must still provide regular and reliable 
lifetime retirement income for multiemployer plans 
participants; and two, that any changes to the existing system 
be structured to reduce or eliminate the financial risks to 
contributing employers.
    We feel strongly that our recommendations satisfy both of 
these concerns and we clearly and fully acknowledge that these 
recommendations come with some measure of pain for the rank and 
file members and retirees that I represent as well as our 
contractor employers. What we seek from this committee and from 
this Congress is your willingness to help remove the obstacles 
that are currently preventing us from fixing our own plans 
without any infusion of taxpayer dollars.
    Having said that, though, I would also like to take this 
opportunity to suggest to this committee that this committee 
explore ways to immediately and effectively address the funding 
shortfalls currently being experienced by the PBGC. Absent such 
action, our plan participants and our contractor employers will 
be forced to endure additional and substantial financial 
burdens on top of those associated with our commission's 
recommendations.
    Taken together, the solutions that have been put forth by 
both labor and management in the construction industry will 
improve retirement security and enhance the ability of plans to 
retain contributing employers by limiting financial volatility. 
Further, our Solutions Not Bailouts plan will work to prevent 
the need for future taxpayer assistance by dramatically 
reducing the agency's expose to plan failures, thereby 
improving the financial outlook of the PBGC multiemployer 
insurance program.
    Thank you for the opportunity to express these views here 
today, and I will be happy to answer any questions the 
committee may have.
    [The statement of Mr. McGarvey follows:]
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                                ------                                

    Chairman Roe. Thank you, Mr. McGarvey.
    Now, Mr. Nyhan, you are recognized?

  STATEMENT OF MR. THOMAS NYHAN, EXECUTIVE DIRECTOR, CENTRAL 
 STATES SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, ROSEMONT, 
                            ILLINOIS

    Mr. Nyhan. Thank you, Chairman Roe, Ranking Member Andrews, 
and other members of the subcommittee, for the opportunity to 
testify today.
    Central States is the second-largest multiemployer plan in 
the country with over 410,000 participants and 1,800 
participating employers, 90 percent of which are small 
employers with 50 or fewer employees. For 30 years the fund's 
investments have been exclusively managed by major financial 
institutions, screened by the Labor Department, and approved by 
the federal court.
    Since its inception, the fund has paid out over $60 billion 
in pension benefits with an average current benefit of about 
$15,000 per year. Since the deregulation of the trucking 
industry, there has been a dramatic consolidation in the 
transportation industry. As a result, thousands of employers 
have gone out of business without meeting their funding 
obligations, leaving the pension fund and the surviving 
employers with the obligation for the unfunded liability.
    Central States continues to be the primary insurer of the 
unfunded pensions of retirees for employers who have simply 
failed. Literally speaking, the pension fund has stood in the 
shoes of the PBGC for 30 years.
    In 1980 there were four actives for each inactive 
participant. Today that is reversed, with nearly five inactives 
for every active participant. Last year we collected $700 
million from employers and paid nearly $2.8 billion in 
benefits. The $2.1 billion annual shortfall must be made up 
with investment returns or the plan will spiral into 
insolvency.
    The fund has done a lot to try to correct these problems. 
After the first market meltdown the fund reduced future benefit 
accruals by 50 percent and froze unreduced early retirement 
subsidies. Additionally, contribution rates have been ratcheted 
up from $170 per week back in 2003 to over $340 a week, or 
$8.50 an hour.
    As a result of these measures, the fund increased its 
annual revenue and reduced its projected liability. As of 
January 1, 2008, the fund actuaries projected the fund would be 
fully funded in 2029, assuming normal investment returns. 
However, as we know, 2008 was not a normal investment year; it 
was devastating, particularly for a mature plan that is 
dependent on investment returns in order to pay benefits.
    The fund experienced an investment loss of nearly $7.6 
billion and paid out 1.8 billion in benefits above 
contributions received from employers. Since 2008 the fund has 
earned positive investment returns but its current financial 
condition remains troubled.
    Unless the fund substantially reduces its liabilities or 
receives a large influx of assets, it is projected to become 
insolvent within 10 to 15 years. And at this point our options 
are very limited.
    The fund would need to earn at least 12 to 13 percent each 
and every year in order to avoid insolvency. That is not a 
realistic investment return assumption.
    The actuaries project that any additional cuts in benefits 
of the active employees or further contribution increases above 
those that have already been mandated will accelerate 
insolvency. Under the existing legal landscape we simply can't 
manage the problem.
    Additionally, the PBGC itself is in dire financial 
condition. For the last several years we have supported 
legislation to update the PBGC's partition authority and 
appropriate the necessary funding as a remedy that would 
preserve the fund's solvency.
    That legislative proposal, had that been enacted, the 
benefits of our participants would have been protected. But 
that legislation was not enacted and no similar legislation has 
been introduced in this Congress.
    As a result, in 2012 the PBGC multiemployer program had 
$1.8 billion in assets but booked more than $7 billion in 
liabilities. Moreover, the PBGC itself projects it will incur 
an additional $38 billion in new claims over the next 9 years.
    Not surprisingly, the PBGC and GAO recently released 
separate reports indicating there was a substantial risk that 
the PBGC's multiemployer program will itself be insolvent 
within 10 years, before the projected insolvency of Central 
States.
    If these projections are correct, the retirees covered by 
the fund face the stark and tragic reality that their pension 
checks could be eliminated in their entirety when the fund 
becomes insolvent. So today we are faced with the Hobson's 
choice of either supporting legislation that allows us to use 
our own assets to provide long-term retirement security at 
reduced levels or doing nothing and facing the substantial risk 
that the retirement checks will disappear completely upon 
insolvency.
    If we do nothing and the PBGC fails we will pay out $28 
billion through date of insolvency. However, if we act our 
participants will receive over $72 billion over the next 50 
years.
    I know others argue that benefit reductions should be 
avoided at all costs by appropriating new revenue through taxes 
or premium increases. I agree. Our preferred solution has 
always been one that would generate additional revenue to 
alleviate the funding shortfalls, as evidenced by our vigorous 
support of past legislative proposals.
    But the fact of the matter is these legislative proposals 
got little or no support from either house, from either party, 
or from the administration. Rest assured, if such legislation 
were ever enacted in the future we would take full advantage to 
restore the benefits of our participants.
    But the retirement security of our participants is too 
important to gamble on wishful thinking. Open-ended and vague 
theories as to how to resolve the funding problems need to give 
way to timely, concrete, and realistic proposals.
    The truth of the matter is there is no funding source 
anywhere on the horizon that deals with shortfalls of this 
magnitude, and time is running out to craft a solution. In 
light of that reality, we believe the only solution is one that 
permits us the remedy of remedying the shortfall ourselves.
    Thank you.
    [The statement of Mr. Nyhan follows:]
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                                ------                                

    Chairman Roe. Thank you. A great job of the committee.
    I will now yield to the committee chair, Mr. Kline?
    Mr. Kline. Thank you, Mr. Chairman.
    I want to thank the witnesses for being here today.
    I want to identify myself with the remarks of Mr. Andrews 
concerning the bipartisan effort that we have here. Both sides 
recognize a problem that needs to be solved, and so I 
appreciate the work that Chairman Roe and Mr. Andrews have put 
into this and their determination to reach a solution.
    Great group of witnesses.
    Ms. Duncan, I thank you for pointing out the challenges 
facing employers who are doing everything within their power to 
run good companies and provide for their employees and yet 
facing withdrawal liabilities that are just staggering and, as 
you pointed out, perhaps more than the value of the company 
itself. And I am hearing that from employers back in Minnesota.
    And, Mr. McGarvey, I am really glad that you are here 
today, and your presence here speaks volumes about the 
recognition of employees to the dangers that are facing them.
    I am extremely impressed that a very diverse group of 
employers and employees and labor unions have come together 
here.
    This group, Mr. McGarvey, includes quite a variety of labor 
organizations. I am just reading them through here: Bakery and 
Confectionary Workers Union, the Iron Workers, the Mine 
Workers, the Electrical Workers, the Bricklayers, the Operating 
Engineers, the Carpenters, the United Food and Commercial 
Workers, the Machinists, the Teamsters, and others. And the 
vast majority of those organizations have been very vocally and 
powerfully supporting the efforts today to find a solution 
here.
    I am also aware that a couple of those organizations whose 
names are in this report, and some who I just named, have once 
again abandoned the group supporting reform. And despite the 
failure of previous legislation, they have apparently deluded 
themselves into thinking that self-help is unnecessary because 
the federal government will bail out these plans. And I don't 
see that as an option. We have seen the press reports, and I am 
afraid that sometimes the leadership is just not being honest 
with their members.
    Again, I commend you, Mr. McGarvey, for facing the hard 
truth that the ultimate solution to this problem--and it is a 
problem, very well articulated by Mr. Andrews--is not likely to 
come in the form of a government bailout. Do you have any 
insight as to why some have now stepped back from supporting 
what was a very solid effort?
    Mr. McGarvey. Congressman, I--you know, insight--I will 
just say that the labor movement is probably much like caucuses 
in the parties in Congress, that strong coalitions are built 
and then frayed at times, and decisions are made to withdraw 
support or give support to different proposals. We very rarely, 
believe it or not, in the labor movement have unanimity on any 
issue, and this----
    Mr. Kline. Actually, I believe that, so----
    [Laughter.]
    Mr. McGarvey.--this is no different. But there is a strong 
group of multiemployer unions out there that are fully 
supportive of this program and looking to you and this Congress 
to help us craft the solutions that are going to give viability 
and predictability in the long term to our existing retirees 
and to our future participants in the construction industry.
    Mr. Kline. Thank you. That is well put. You would have some 
potential here for this dais.
    Mr. Nyhan, boy, you have got your hands full. We don't ever 
talk about this problem without talking about Central States, 
so I very much appreciate your remarks and your weighing in on 
this to help us reach a solution--truly a bipartisan solution, 
as we try to hammer this out.
    So again, thanks to all of you for being here today, for 
your testimony. We appreciate your knowledge, your insights, 
and your being here to answer our questions.
    And, Mr. Chairman, I yield back.
    Chairman Roe. Thank the gentleman for yielding.
    Mr. Andrews, you are recognized?
    Mr. Andrews. Thank you, Mr. Chairman.
    I would like, again, to thank the witnesses for their 
contributions here this morning.
    And, Mr. Certner, I think you deserve credit for putting 
forward some alternatives and solutions. I think it is very 
important to add that to the dialogue, and we appreciate that.
    I wanted to walk through a couple of those with you so I 
could fully understand them. On page four of your testimony you 
say that we should require steps that plans can take now to be 
taken before they consider any benefit adjustments. Is that a 
fair statement of your position?
    Mr. Certner. Yes.
    Mr. Andrews. And you talk about the ability to cut back 
adjustable benefits as part of that package. What are 
adjustable benefits? Who receives them? And do you think we 
should require that adjustable benefits be reduced before 
anything else is done?
    Mr. Certner. Well, the adjustable benefits are already 
permitted in the law to be adjusted under the PPA. Now, I am 
not saying we are completely comfortable with removing any of 
these accrued benefits, but at least you have steps in the law 
that are permitted today. For example, early retirement 
subsidies are adjustable benefits.
    So we think certainly we should be looking at those 
benefits that in the law today can be adjusted before we look 
at cutting back accrued benefits----
    Mr. Andrews. So is it your position that someone who has 
already received an adjustable benefit could have it reduced or 
that someone who has not yet received it could be deprived of 
it?
    Mr. Certner. Again, we are uncomfortable with eliminating 
any of these adjustable benefits, but these are certainly 
preferable to looking at these kinds of benefits prior to 
looking at the benefits of current retirees in paid status.
    Mr. Andrews. So although I--again, I understand that we 
would share your discomfort of having to do that. I want to be 
clear: Would you want the law to require that a fund reduce 
adjustable benefits before it would consider any other benefit 
cut?
    Mr. Certner. Absolutely. And let me just state, we 
recognize what a difficult problem this is and what difficult 
choices we are making here. Many of us don't like any of the 
choices that are on the table. But clearly when we have 
provisions in the law that allow you to reduce adjustable 
benefits already, those steps are far preferable to take before 
we go ahead and start reducing the accrued benefits of 
retirees.
    Mr. Andrews. What do you think, and this is not a 
rhetorical question, what do you think the difference is 
morally? I know what the difference is legally, but what do you 
think the difference is morally between an adjustable benefit 
and an unadjustable benefit, as those terms are used in the 
2006 law? What is the moral difference?
    Mr. Certner. Well again, I am not sure there is necessarily 
a moral difference. Right now we certainly have a legal 
difference because one is permitted under the law, and----
    Mr. Andrews. Right.
    Mr. Certner.--I think that it is important to understand 
that the anti-cutback rule is a fundamental provision in the 
law, and to go and say to retirees and workers that, ``Hey, you 
know, that promise that we have made to you, that guarantee we 
have made to you that when you earn a benefit you are going to 
get it? Well, you know, that may not be as solid as we have 
said it was and, you know, we are going to allow people to go 
ahead and take away your benefits when you retire,'' is really 
a step too far.
    Mr. Andrews. You recommend, and I think it is an 
interesting recommendation, about encouraging mergers between 
relatively healthy plans and relatively unhealthy ones, and you 
talk about us clarifying or increasing the tools of the PBGC to 
do that. What kind of tools would you like to see us give the 
PBGC to facilitate more mergers between healthy and unhealthy 
plans?
    Mr. Certner. We certainly don't know the whole range of 
plans that are out there and what exists and how much help 
these can be. In fact, these are some of the things that we 
want to recommend the committee look at. And there may be some, 
for example, fiduciary rules right now that may prevent some of 
the combinations of plans or mergers and alliances that could 
possibly be helpful.
    But again, if we are looking at a series of difficult 
choices then we want to make sure that we are looking at 
choices that are at least better than cutting accrued benefits. 
I am going to keep coming back to that refrain here.
    Mr. Andrews. Speaking as a layperson here on this--I don't 
have the experience you do, but my instinct tells me that 
healthy plans are really not likely to merge with unhealthy 
plans because they don't want to catch the virus the unhealthy 
plans have. I mean, even if we gave the PBGC those tools do you 
think it is very likely that many people would take advantage 
of it?
    Mr. Certner. Well, in some instances here I think we have 
overlapping employers who have both these healthy and unhealthy 
plans, and I think that is the first place we would want to 
look. But again, I think these are difficult issues, and I am 
sure--and we don't want to see healthy plans really put in a 
situation where they also become unhealthy because----
    Mr. Andrews. One other thing I was--you mentioned increases 
in PBGC premiums, and I think we should clearly consider those. 
But it is true, isn't it, that even if the PBGC has more income 
that would simply reduce the deficit numbers, it wouldn't 
increase the benefit that a pensioner receives if his or her 
pension is dumped into the PBGC, is that right?
    Mr. Certner. Well, depending on how much we raise the 
premiums, yes.
    Mr. Andrews. But it would--you would have to raise the 
premiums by a factor of 10 just to take care of the existing 
deficit to protect existing benefits. Isn't that right?
    Mr. Certner. Under the PBGC's numbers, yes, I think that is 
true.
    Mr. Andrews. So we would have a 10-fold increase that would 
just put us where we are right now, which is a huge benefit cut 
for people thrown into the fund, right?
    Mr. Certner. Again, we are not talking about easy choices 
here.
    Mr. Andrews. We sure aren't.
    Mr. Certner. When we are talking about, you know, people 
potentially seeing their benefits cut by 40 percent----
    Mr. Andrews. Right.
    Mr. Certner.--and losing thousands of dollars a year and 
you are telling me that, you know, maybe a premium increase 
could go from $10 a person to even 100 a person, that to me 
still seems like a better choice than cutting somebody's 
benefits and pay stubs.
    Mr. Andrews. We appreciate the positive alternatives you 
have put forward today. Thank you.
    Chairman Roe. I thank the gentleman for yielding.
    Dr. DesJarlais, you are recognized?
    Mr. DesJarlais. Thank you, Mr. Chairman.
    And appreciate you all being here today. I would like to 
start with Mr. Nyhan.
    Without changes to the law, when will the Central States 
plan become insolvent?
    Mr. Nyhan. We are projecting insolvency in 10 to 15 years. 
I think the current deterministic projection is in 2024 or 
2025.
    Mr. DesJarlais. Okay. What tools are available to plans to 
prolong their ability to pay benefits?
    Mr. Nyhan. The tools we currently have available is to 
raise contributions or to reduce benefits to the extent legally 
possible. It is a complicated question, however, when you take 
a look at reducing, for example, ancillary benefits, as the 
gentleman from AARP suggested, because many times that 
dissuades active members from continued participation in the 
plan. When that happens you lose your actives.
    A great portion of the contribution earned by the active 
going into the plan is used to subsidize the benefit of the 
retiree. So as you lose actives you actually accelerate your 
spiral towards insolvency. Our professionals have looked at it 
and determined we have cut benefits, for example, that we can, 
and any further reductions in the benefits will incent people 
to leave the plan and accelerate insolvency.
    Mr. DesJarlais. Thank you. And thank you, Mr. Nyhan.
    Ms. Duncan, that kind of leads into a question I had for 
you. As Mr. Nyhan suggested, one suggestion for ensuring plan 
solvency is to continually raise contributions. Can you explain 
whether we can solve plan funding issues simply by requiring 
larger contributions?
    Mr. Duncan. By increasing the contributions it would 
effectively make companies like mine noncompetitive with those 
that aren't even paying into a pension plan. And right now you 
have an issue where the premiums that we are paying in that 
were 30 or 40 percent less than they were 10 years ago and the 
pensioners that have retired, the apprentices are getting far 
less money in their pension going forward and they are--if 
they, you know, realizing that, there is no reason for them to 
stay in the industry if they don't think that they are going to 
get the benefit that the guys that have already retired are 
going to get.
    So by increasing the benefit, the benefit isn't really 
going to the employee; it is going to more the retiree and to 
the unfunded liabilities.
    Mr. DesJarlais. So how do you stay competitive?
    Mr. Duncan. That is a good question. It is something I deal 
with every day, and it is just trying to think of, you know, 
new ways to be better and trying to keep the guys going.
    Mr. DesJarlais. Thank you.
    Mr. McGarvey, as you know, the commission has recommended 
creating different types of new pension plans. Some of these 
designs include lower guaranteed benefits with an opportunity 
to benefit from market appreciation, as in the traditional 
defined contribution plan; others might feature more 
conservative funding requirements.
    Would you recommend that the bargaining parties agree to a 
contract that included one of the NCCMP's alternate plan 
designs?
    Mr. McGarvey. First and foremost, you know, the situation 
is that the vast majority of multiemployer plans are well 
funded and won't need a lot of the tools that are provided in 
the commission's report. Those that will, if legislation is 
enacted, I would certainly encourage to look at using all the 
tools, including new plan design, going forward. Because our 
goal, particularly in the building trades goal, is to make sure 
that we have sustainable, predictable retirement security for 
the members who come through our industry and the contributions 
that are made on their behalf by their employers. That is our 
goal in this whole thing. We are not looking to cut anybody's 
benefits; we are looking to maintain what we have got and grow 
it for the participants that are in our plans.
    Mr. DesJarlais. Thank you.
    That is all I have, Mr. Chairman. I yield back.
    Chairman Roe. Thank the gentleman for yielding.
    I now will recognize Mr. Andrews?
    Mr. Andrews. Yes, just for a couple of housekeeping 
opportunities. I did want to acknowledge the presence of a 
mentor and friend and very powerful, thoughtful labor leader. 
Tom Buffenbarger of the International Association of Machinists 
is with us. We appreciate his presence.
    I would ask unanimous consent that testimony that Mr. 
President is submitting for himself and his members be admitted 
to the record?
    [The information follows:]
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                                ------                                

    Chairman Roe. Without objection, so ordered.
    Mr. Andrews. And we also have testimony from the 
International Brotherhood of Teamsters. Would I ask the same 
request?
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                                ------                                

    Chairman Roe. Without objection.
    Mr. Andrews. And from the Boilermakers, the same request to 
be put on the record?
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    Chairman Roe. Without objection.
    Mr. Andrews. Tom, we are happy to have you with us.
    Chairman Roe. Welcome.
    I will now recognize, I think, Dr. Loebsack?
    Mr. Loebsack. Thank you, Dr. Roe.
    Well, I do want to thank all of you for being here today to 
discuss this issue that I think we can all agree is extremely 
critical for the hardworking middle class across the country, 
middle class families, and I think we--all of us here can agree 
that something really has to be done. I think we are at that 
point.
    Something has got to be done to shore up the multiemployer 
pension plans that are at risk of failing. And certainly in 
these difficult economic times it is more important than ever 
that those--I believe, at least--those who have worked hard 
their entire lives and have contributed to their pensions 
receive the benefits that they have come to expect, and I would 
argue that they, in fact, deserve.
    I think it is particularly important for those who are near 
retirement and have made important financial decisions at age 
60, 62, whatever, based on an expected pension. I think it is 
really, really critical for those folks in particular. I think 
we need to think about the ability of these individuals to 
adapt to any kind of fundamental changes that might come to 
multiemployer pensions.
    I also believe that this really, at its core, is a fairness 
issue. How do we determine what size of a cut is fair for which 
workers, and how do we justify taking away earned benefits from 
a worker whose plan has gone under through no fault of their 
own? I think that is a really critical question.
    I think we need to think very carefully--and I appreciate 
what you folks have had to offer today--think very carefully 
moving forward so I want to be sure that we fully understand 
what this proposal would mean for workers.
    So, Mr. McGarvey, if you can, and if you can't today, I 
will take a response in writing, but if you can, walk us 
through how these cuts would specifically affect a retiree who 
has worked 30 years, 15 years, and 5 years at a participating 
employer. And I would like to know, if you can give us the 
number today, how much their average benefit is now and how 
much they would see cut if their plan went under--those 
different levels: 30, 15, and 5 years. You may not have that 
off the top of your head, and I will take it in writing if you 
don't, but if you could address that question.
    Mr. McGarvey. Well, some of it I do not have off the top of 
my head, but basic premise is, I mean, it is a situation I have 
in my own family. My father is a pensioner for one of these 
troubled plans. The potential that he is going to wind up in 
PBGC or, with enacted legislation, give the trustees the 
tools--and I think that is the key here: We are not asking 
Congress to make the decisions, and nobody is asking us on this 
panel to make the decision. The decisions will be made by the 
board of trustees in that local area that runs that local 
pension. They will determine, based on the advice of the 
professionals, where the proper changes and adjustments to make 
to the plan to keep the plan's solvency and mitigate any damage 
to the existing participants of the plans and the existing 
retirees.
    That is not going to be a decision made in Washington, 
D.C.; that is going to be a decision that is made in some 
communities. And again, going back to my earlier statement, the 
vast majority of our plans don't need that tool. There are lots 
of tools in this proposal besides that tool that you describe 
there.
    In those situations where they have it will be boards of 
trustees made up of union representatives and contractor 
representatives on the advice of professionals which will 
determine, certainly with the input of the membership and the 
existing retirees in that pension fund, on the changes that 
they have to make and what is most palatable and what mitigates 
the most damage to the existing and future participants in the 
plan.
    Mr. Loebsack. I think that up here, though, you know, we 
are going to have to make a decision. We are going to have to 
vote for or against whatever legislation may be presented to us 
and we are going to have to have as much information as we 
possibly can have from those folks who are crafting whatever 
legislative proposal we are talking about, so that is why I 
asked for specific examples, if I can get that down the road.
    I understand that there are going to be folks at the local 
level that are going to be making these decisions, but we are 
going to have to have as much information about how those 
decisions may get made, as well. So can you give us some idea 
of what kind of factors those folks at the local level would be 
taking into account to make the kinds of decisions and be able 
to answer the question that I asked at the outset?
    Mr. McGarvey. Well, I don't have the data but we will 
provide all that data to you as soon as we can get it up to 
you.
    Mr. Loebsack. Can any other member here want--does any 
other member of the panel want to weigh in on that, what kinds 
of factors that might be taken into account?
    Mr. Nyhan. Well, if I might, I think the NCCM proposal is 
illustrative of some things that we need to take into account, 
but it is not prescriptive. And we would, of course, encourage 
the Congress to be a little bit more prescriptive in some of 
the things you should consider.
    Clearly, and while our trustees haven't weighed in on this 
yet, we would consider age, whether somebody is disabled, 
whether somebody is a surviving spouse, whether the time that 
they spent with the plan is very minimal. So they have an 
accrued benefit, they spent 5 years on the plan and went out 
and earned a law degree and they are not really depending on 
the benefit would be a different category than somebody who had 
spent 35 years in the industry.
    I think you would have to take into--we also, in our 
particular industry we have what we call reciprocity, so many 
members earn a small benefit in our plan and they earn a larger 
benefit in a different plan. You might want to treat those 
people a little differently than people who are in our plan and 
have their entire benefit in our plan.
    Mr. Loebsack. Thank you.
    Mr. Nyhan. So there are quite a few items I think we would 
think about in terms of coming to a conclusion as to how to do 
this.
    Mr. Loebsack. Thanks to all of you.
    And thank you, Dr. Roe, for indulging----
    Chairman Roe. I thank the gentleman for yielding.
    I will now yield to Mr. Salmon, 5 minutes?
    Mr. Salmon. Thank you.
    Mr. Certner, AARP opposes the reform proposal which would 
allow distressed plans to reduce accrued benefits. I understand 
that. But for plans that have taken all responsible measures 
but are still facing impending insolvency, do you have another 
proposed alternative other than beefing up or increasing 
funding for PBGC?
    Mr. Certner. Our written statement suggests some potential 
alternatives to look at that I have described before--looking 
at ancillary benefits, looking at mergers and partitions and 
alliance, looking at perhaps low-interest loans from the 
government or from the private sector to help bridge this gap. 
Again, we are talking about something that is very difficult. 
There are very difficult choices being made.
    But fundamental rules like the anti-cutback rule, which say 
if you have earned a benefit it can't be cut back--these rules 
were intended to apply not when things are easy but when they 
are hard, to make sure that people do get their benefits. And 
we have just heard a description here about how, you know, 
under projections of insolvency maybe 15, 20 years from now for 
these plans, you know, the alternatives of cutting people's 
benefits now who are living on relatively meager benefits 
versus working on options and alternatives over time help 
extend the lives of these funds seems to us very much falls 
down on the side of protecting current accrued benefits.
    Mr. Salmon. On the proposals that you have put forward, has 
anybody at AARP crunched the numbers to determine whether these 
approaches are viable or realistic? And has anybody else vetted 
these same proposals?
    Mr. Certner. I don't think that--we certainly haven't had 
time to crunch numbers on these. We have tried to put forward 
alternatives, and we have looked around and talked to people to 
see what is possible, what is out there, what might work, what 
could help the situation.
    Again, we don't know the different scenarios that all these 
plans face. It is very difficult to actually even get solid 
information as to exactly what the financial status is of some 
of these plans.
    But we think going forward that this committee, and perhaps 
with the help of the Pension Benefit Guaranty Corporation, 
needs to look at these options. And certainly I think there are 
other creative options that are out there.
    Mr. Salmon. I understand that the funding provisions in the 
Pension Protection Act for multiemployer plans is going to 
expire at the end of 2014. Would you be supportive of Congress 
extending those provisions or do you think we should revert to 
pre-PPA law?
    Mr. Certner. Again, if it is going--we are happy to look at 
any options that may help forestall cuts to current accrued 
benefits for people.
    Mr. Salmon. Okay.
    Mr. Nyhan, would raising employer contribution rates work 
towards solving Central States funding problems?
    Mr. Nyhan. No. We have modeled--our actuaries have modeled 
this and determined if we increased employer contributions at 8 
percent a year for each and every year in perpetuity that would 
move our insolvency date by 60 days at the end of the 10-or 12-
year period.
    The problem is that there are so fewer participating--I 
mean, 1,800 sounds like a lot, but compared to the size of the 
fund that had 10,000 participating employers, the size of the 
retiree group is so much bigger than the active group, raising 
contributions or cutting benefits on a very small group of 
actives or participating employers just does not move the 
needle. It doesn't move the needle.
    Mr. Salmon. Tell us more about the withdrawal liability. Is 
this a feasible option for most employers?
    Mr. Nyhan. Withdrawal liability is getting incredibly 
difficult for many of these employers. The numbers are very, 
very large, particularly with the downturn in 2008, and you 
combine that with the rehabilitation plans or funding 
improvement plans that were mandated by the Pension Protection 
Act has increased the contribution requirements by contributing 
employers, and that combined has raised the present value of 
the withdrawal liability astronomically, all things being 
equal.
    So it is a very difficult thing. It is hard for employers 
to go out and get credit. It is hard for employers to actually 
transact business with the size of the contingent liabilities 
associated with the plan.
    Mr. Salmon. Thank you.
    I yield back the balance of my time.
    Chairman Roe. I thank the gentleman for yielding.
    I will now recognize Dr. Holt for 5 minutes?
    Mr. Holt. Thank you, Chairman Roe.
    Part of what we are talking about today, of course, is a 
proposal that is out there that maybe as we speak is falling 
apart, but it is worth discussing because it is what is on the 
table in front of us. There seem to be some assumptions that 
are widespread out there, and that is that, well, families will 
just have to swallow hard and take cuts, that defined-benefit 
plans are a thing of the past, that multiemployer plans are 
always mismanaged, and that bailouts are off the table.
    I guess I would ask why that, for each one of those points, 
why that idea is out there. I think that, well, there is 
question about those assumptions in each case. I think it is 
part of a larger crisis.
    Bailouts are off the table except when they apply to other 
sectors. You know, we are talking about 10 million, I think it 
is, employees who are affected by these. And it is, as I say, 
part of a larger crisis in retirement plans.
    Let me ask a couple of things.
    First of all, let me ask Mr. Certner. What do you think 
would be the implication for other defined-benefit plans--
single-employer plans and individual plans--if the proposed 
changes were made? Are there implications for those plans? 
Would insurers want to get off the hook in those other plans?
    Mr. Certner. Well, I think what is important here is we are 
talking about a very fundamental principle of ERISA, that an 
earned benefit, an accrued benefit, can never be taken away. 
And to violate that basic piece of ERISA for this area and in 
this circumstance really, I think, sets a precedent and opens a 
door that we certainly don't want to see opened.
    I think it has been very clear over the years in the 
pension law that if you earn a benefit, you have an accrued 
benefit, that benefit cannot be cut back, cannot be taken away. 
And I think it is a fundamental mistake if we changed that rule 
in this circumstance because it would open the door to other 
circumstances, as well.
    Mr. Holt. Mr. Nyhan and Mr. McGarvey, what will be the 
advantages of the various administrative savings that have been 
proposed? Mr. Andrews asked the question of whether mergers are 
likely or attractive, but I guess I would like to know what 
might be the benefit of mergers if they were to take place on a 
large scale?
    Let me start with Mr. Nyhan.
    Mr. Nyhan. In our case there is no viable merger partner 
whatsoever. I think Ranking Member Andrews had it correct. 
Healthy plans don't want to dilute their assets and merge with 
plans that are in trouble. So I don't, you know, it----
    Mr. Holt. Let's put aside the motivation there of whether 
they would sign up. If they did, do you see administrative 
savings, and therefore benefit?
    Mr. Nyhan. If two plans merge you will have administrative 
savings, yes.
    Mr. Holt. Give me a sense of the scale. Is it enough to 
affect the overall----
    Mr. Nyhan. Well, our total GNA, for example, all of our 
salaries, all of our buildings, all of our computers, et 
cetera, et cetera is, what, $25 million a year, you know, over 
10 years towards insolvency. That is $250. And we have an 
unfunded liability of $17 billion. So it really, it doesn't 
impact.
    Mr. Holt. Mr. McGarvey?
    Mr. McGarvey. I have actually, in a former life, worked on 
consolidation in a lot of cases of trust funds, particularly 
health care funds and pension funds, when those things were 
described made sense, and we did lots of them. So if you had, 
you know, five small pension funds and you could merge them 
together into a sixth bigger pension fund, the net result of 
that on administrative costs is you get rid of five attorneys, 
five actuaries, five accounting firms, and you can negotiate 
better cost for investment services for the fund. You can 
consolidate staff; you can consolidate computer systems; you 
can do a a lot of different things to cut down your 
administrative expense.
    And that has been done and continues to be done today out 
there. There is no prohibition against merging of pension funds 
that exists out there today.
    But to really deal with the amount of unfunding in some 
funds, those administrative reductions in cost wouldn't move 
the needle, as my colleague said.
    Mr. Holt. Thank you.
    Well, my time is expired. I hope you will find a way to 
address, either today or in writing to the committee, what 
could be done, other than cutting benefits, with regard to 
loans at low interest and bond guarantees--government-
guaranteed bonds, and other such proposals.
    Thank you.
    Chairman Roe. I thank the gentleman for yielding.
    Mr. Guthrie?
    Mr. Guthrie. Thank you, Mr. Chairman, for having this. This 
is an important hearing.
    And thank you guys for coming. I appreciate it.
    My dad worked at a defined-benefit plan. He worked for a 
plant that closed. And unfortunately for him, he moved--he 
worked himself into the management side so he has actually seen 
his pension erode some, but the guys that coached me in little 
league, the people I grew up with, fathers of the people I grew 
up with--mostly fathers--are, you know, worried. I mean, they 
retire, they leave a place that they work with a defined 
benefit.
    And I always remember talking to my father one time and I 
said, does anybody ever--did you ever tie to it, or people 
didn't really tie to it, but the ongoing economic viability of 
the enterprise secures the pension going forward. And that when 
you leave work on the last day when you have earned your 
benefit and, you know, what happens in your business going 
backwards is important to what you have going forward. But 
people have organized their lives around these pensions. And so 
whether or not their business is as successful after they left 
or not is a concern, but they have organized their lives around 
so the things that I know Mr. McGarvey has talked about being 
able to do so that people can continue the benefit that they 
have.
    And you said, when you were talking, you said we weren't 
looking for a bailout but for us to remove obstacles. Are there 
a couple of obstacles--I know in your written testimony you 
talk about some, but just to highlight that we could do that 
would make it easier for you now that is not, you know, taking 
taxpayer money into it but just obstacles to make you--where 
the commission can do what needs to be done?
    Mr. McGarvey. Well again, in the proposal it gives--makes 
changes in ERISA that gives trustees more authority to make 
tough decisions in some cases that it would make. Right now 
they are prohibited.
    The ancillary benefits that were spoken about a lot and in 
testimony, the answer to that question is, just about in every 
case in just about every multiemployer pension across the 
country that has a pressing liability issue, those changes have 
been made. Those decisions have been made. The early retirement 
provisions that were in there and other things, they have been 
taken away.
    Increased contributions, okay, to help fund those pension 
funds, particularly in the construction industry--in most cases 
that has been done, okay? My colleague over here, Ms. Duncan, 
described increased contributions and what that means to remain 
competitive in a very competitive marketplace.
    Mr. Guthrie. Right.
    Mr. McGarvey. We are in some places past the point for some 
funds for the contributing employers to remain competitive, 
okay? They are, in some cases, contributing $15, $16, $17 an 
hour into a pension fund where the participant who is having 
that money contributed on his or her behalf is only accruing 4 
worth of benefits. You know, we are hitting that ceiling in 
some cases.
    And I want to reiterate that the vast majority of 
multiemployer pension systems are on sound footing, even with 
what we have been through over the investment downturns in the 
late 1990s, early 2000s and 2008. I think that speaks volumes 
on the work that the professionals and the trustees on these 
plans have done to deal with those two catastrophic situations 
in a 10-year period and still keep viable pension plans where 
the overwhelming majority are in pretty good financial shape.
    There are some that, you know, that, you know, really need 
some tool for trustees to be able to use to help them bridge 
the next gap.
    Mr. Guthrie. Well, thank you for that.
    And in Kentucky--I am from Kentucky--the coal industry has 
seen the problems that you are having with the last man 
standing kind of problem. Who is going to be the last coal 
business standing is going to be responsible for all the 
retirees, and it just continues to add to the downward spiral 
that is happening--you know, I won't get into what is happening 
here to the coal industry in other committees that I am on--an 
Energy Committee--so it is very serious stuff.
    And I have actually, Ms. Duncan, had a friend of mine in 
Owensboro, that I met serving into his plant and he is 
concerned about passing down his business to his children. And 
the biggest liability he has is the pension liability that his 
children may not be able to run their business. And I know--you 
are a family business, I believe, right? Are there people in 
your area that have concerns about the ability to 
multigenerational because of the liability going forward?
    Mr. Duncan. Absolutely. Absolutely. It is part of your 
estate planning and there are exit strategies going on every 
day, and you--it is a last man standing situation. You don't 
want to be the last man standing but you--to have the 
uncertainty of what that--you know, the pension liability is 
going to be for my daughter is something that is just 
unfathomable when it even exceeds the value of your company.
    And you look at those figures over a year, well I only 
contribute to two plans. Some contractors contribute to 10 or 
12. So I can look at my calculations and just in the last 2 
years it has risen by millions.
    Mr. Guthrie. Yes.
    And that is what hopefully I--thanks for having this, Mr. 
Chairman. I know that you have got two things. One, that people 
on your side that are funding this and the last man standing is 
a real issue because you just can't afford to do so. And you 
have people who showed up for work every day doing what they 
were expected to do with a benefit that was promised and now--
or, because we are living longer, too, it is doing that with a 
lot of the systems that we have here in the--so being serious 
about it and something that I take to heart because I have seen 
it happen to people.
    And I hope we can come to some solutions and help you solve 
the problems.
    Mr. Duncan. No one on either side could have anticipated 
the economic situation that we ended up in.
    Mr. Guthrie. Exactly.
    Thank you, Mr. Chairman. I yield back.
    Chairman Roe. Thank the gentleman for yielding.
    I will now recognize Mr. Scott for 5 minutes?
    Mr. Scott. Thank you, Mr. Chairman.
    Ms. Duncan, one of the things that you have kind of alluded 
to is the fact that he last man standing rule and that creates 
a disincentive for companies to join these plans. Is that 
right?
    Mr. Duncan. Absolutely. No new employer will join a plan 
where there is unfunded liability that you are going to sign up 
for straight up. And with the new provisions that we are 
putting forth there would be no liability going forward, or 
less liability going forward. So you would be able to attract 
new employers into these plans, which would help--as we can 
build hours and build the employees it is going to make all the 
plans healthier if we can increase the membership.
    Mr. Scott. Thank you.
    Ms. Duncan, do you say what--how much difference a premium 
of $120 would make? Because that is what PBGC has said that 
would reduce to less than 1 percent the chance of insolvency of 
the PBGC in 10 years.
    Mr. Duncan. I can't specifically address the ounce that the 
premium paid to the PBGC is paid through the health trust 
trustees. I am not a pension trustee; I am a health trustee.
    But I do know that the premiums have been low and that----
    Mr. Scott. Well, I mean, would that--just as a matter--just 
multiplying by the number of employees you had, would that 
create a significant hardship to your company?
    Mr. Duncan. No, I don't believe so.
    Mr. Scott. Thank you.
    Mr. Nyhan, one of the things that I had looked at as a 
possibility of a different premium based on whether you are in 
the green, yellow, or red zone, is that something that would 
help?
    Mr. Nyhan. Absolutely not. We have paid premiums now for 
many, many years--$60 million over the last 30 years--and we 
have no coverage whatsoever. And the more the premiums go up as 
it relates to my plan, all I am doing is taking assets out that 
are otherwise payable for benefits and putting it into the PBGC 
to pay other benefits. We won't see any benefit out of the 
thing.
    And the 120 number, by the way, deals with the projected 
insolvency over 10 years not including Central States. So that 
doesn't include the $17 billion if Central States went 
insolvent. So that $120 only gets you out 10 years.
    Mr. Scott. And one of the things you mentioned was a 
significant loss in assets during the stock crash.
    Mr. Nyhan. Right.
    Mr. Scott. Would that have been prevented if you had been 
limited in your investment portfolio to insurance options and 
annuities where the risk of a stock market collapse, which is 
going to happen every 10, 20, or 30 years, would accrue--that 
that risk would go to the insurance company, not to the pension 
plan?
    Mr. Nyhan. As I indicated, the assets are managed by 
independent asset managers--independent fiduciaries appointed 
by the court. The board itself had no control over how assets 
are managed.
    But the asset allocation portfolio of Central States was 
not too different than any other major single-employer plan out 
there. I mean, most plans----
    Mr. Scott. All of them are at risk to a stock market 
collapse that would put the plan in jeopardy?
    Mr. Nyhan. All plans assume a degree of risk with their 
investments, whether in the fixed-income or whether they are in 
the equity markets. You know, right now one might argue that 
having a lot of money in the fixed-income market is a big risk 
right now because if interest rates start moving up the market 
value of the fixed income goes down. So you are going to have 
to--you can't hide from risk.
    Mr. Scott. Yes, but you can insure the risk by buying 
products where the insurance company or the investors take the 
risk, not the pension plan, where they guarantee an annuity, 
for example, and the risk of the market going up and down is on 
the insurance company, not on the pension plan.
    Mr. Nyhan. I am not aware of that being done on the scale 
we are talking about with a plan the size of Central States 
where the plan would go out and buy annuities. That is a very 
expensive way of going about it, though, because what the 
insurance company is going to do is the same thing the plan 
does but then layer a premium on top of it. And you just need a 
pretty big insurance company that will make sure they can make 
good on their word.
    Mr. Scott. An insurance company would have reinsurance so 
you would have kind of backing up, then you would have the PBGC 
behind that. What would you do with a low-interest loan?
    Mr. Nyhan. I can't pay a loan back. Who is going to make a 
low-interest loan to us? I mean, I think that is our problem. I 
mean, I would be happy to take a low-interest loan. I would 
turn it over to my main fiduciaries and have them invest it as 
they see fit.
    But the problem is I really don't have an ability to pay it 
back. If I am looking at insolvency there is no lender in his 
right mind that is going to lend us money. That is the problem.
    Mr. Scott. Thank you, Mr. Chairman.
    Chairman Roe. Thank the gentleman for yielding.
    I now will yield to Mrs. Roby for 5 minutes?
    Mrs. Roby. Thank you all for being here today.
    Ms. Duncan, your testimony noted that your husband is 
retired and he is drawing his retirement from a multiemployer 
pension plan, so can you explain to us just, you know, in your 
own words your frustration and uncertainty that your family 
feels regarding the benefits? And what would you like to see 
done to preserve them?
    Mr. Duncan. Any type of benefit cut would be tough. You 
know, we are like anybody else. We have planned our pensions 
and we have planned our living on this set amount of income 
that we thought was going to be coming in.
    But unfortunately, I guess, in my experience, I 
understand--and I think very few people do--the alternative, as 
if the plans do fail his pension would be cut even more 
severely. And from him going from maybe a $60,000-a-year 
pension to a $13,000-a-year pension if it failed and went to 
the PBGC--if the PBGC was still here, if it was not, you know--
hadn't gone insolvent.
    I would rather see the benefits taking the small actions 
going forward and planning ahead of time rather than waiting 
until it was too late to make those decisions.
    And I would also just like to state that, you know, we talk 
about the pensions, the benefits being taken away, but we have 
to realize that there was a point where if our plans were 100 
percent funded we had to increase those benefits. We had to 
give them a higher accrual rating; we had to promise more 
benefits to keep our plans tax deductible. And those benefits, 
once given, can never be taken back.
    Mrs. Roby. Thank you.
    Mr. McGarvey, your testimony makes reference to a rise in 
intergenerational resentment. Can you explain what that means 
and what reforms could be made to alleviate that issue?
    Mr. McGarvey. Yes, ma'am. You know, the fact of the matter 
is that our unions are participatory unions. The craft unions 
historically is a mentorship operation, where skill sets are 
transferred from an older generation to the new generation over 
time, where there are sometimes two and three and four 
generations, five generations of families and family-owned 
businesses in a particular craft in a particular city.
    So as the younger generation gets more and more agitated 
over the increased cost to provide the benefits for the older 
generation, which has always been part of our system; you know, 
we are all in it together and the young take care of the old 
and we all look out for each other, cradle to grave type of 
trade unionism is what we have.
    But as these costs increase and they are not accruing 
benefits and you know, everybody thinks that they are, you 
know, they watch CNBC, they think they are a sophisticated 
market investor that they are seeing these dollars being put 
into a pension fund that they are not really accruing benefits 
and they start to look at the opportunities if they had those 
dollars in their pockets to invest in the marketplace, and they 
start to resent that they are paying these outsized obligations 
because of, you know, quite honestly, like I said, two horrific 
market meltdowns in a 10-year period or a 9-year period, and on 
top of that, the worst--in the construction industry we didn't 
go through a recession in 2008, we went through a depression 
and we are not out of it yet.
    So not only are they paying increased contributions to make 
up these shortfalls in these funds when they have the 
opportunity to work, in a lot of cases over the last 5 years 
they haven't even had work. So it is causing stress within the 
organizations at the local level. And there is a lot of 
intertwined family in a lot of these organizations so it gets 
ugly from time to time as we try to work our way through these 
things.
    Mrs. Roby. And should the goal of reform be to make sure 
that the PBGC is funded or to prevent plans from becoming 
insolvent in the first place?
    Do you--yes, sir?
    Mr. McGarvey. I believe both of those are very important 
goals.
    Mrs. Roby. And do you agree with those that say that the 
system can be saved by charging a $250 fee per plan 
participant?
    Mr. McGarvey. I do not believe that.
    Mrs. Roby. I have maybe 30 seconds, but Mr. Nyhan, just to 
confirm your testimony, what annual return on investments would 
Central States need to receive in perpetuity in order to remain 
solvent?
    Mr. Nyhan. 12 to 13 percent each and every year.
    Mrs. Roby. And is that reasonable in relation to historic 
returns?
    Mr. Nyhan. Not according to our professionals, no.
    Mrs. Roby. Okay.
    Thank you. I yield back.
    Chairman Roe. I thank the gentlelady for yielding.
    Mr. Hinojosa, you are recognized for 5 minutes?
    Mr. Hinojosa. Thank you, Mr. Chairman.
    I want to yield a minute to Congressman Scott?
    Mr. Scott. Thank you.
    Mr. Chairman, I ask unanimous consent that a statement from 
the United Steel Workers be entered into the record for the 
hearing?
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    Chairman Roe. Without objection, so ordered.
    Mr. Hinojosa. I reclaim my time.
    Mr. Certner, in your testimony you explained that AARP is 
adamantly opposed to giving plan trustees the broad discretion 
to cut accrued benefits for participants to achieve solvency. 
Will any of the alternative proposals you described in your 
testimony be sufficient to preserve the multiemployer pension 
system or does more need to be done?
    Mr. Certner. Mr. Chairman, I think we have tried to put 
forward a number of suggestions and alternatives. I don't think 
by any means that we have exhausted the potential alternatives 
that are out there.
    And our view certainly is that before we begin to look at 
any cuts to retirees, any cuts to accrued benefits, we should 
look at the alternatives I put forward and that the other 
alternatives that are out there, and some other creative 
thinkers I am sure can come up with additional suggestions, as 
well.
    We just think this rule is so very important that we 
shouldn't be starting with a plan that puts retirees right at 
the top of the list, that we ought to look at everything else 
possible before we even consider looking at retirees' benefits.
    Mr. Hinojosa. Well, let's see. Let me ask Sean McGarvey, 
president of the AFL-CIO Washington, D.C. office, why is the 
preservation and protection of multiemployer pension plans 
important to your union's members?
    Mr. McGarvey. They are important to our unions and our 
members and generations of our members that have come before. 
They have provided secure retirement benefits for our 
membership and their families for decades upon decades.
    And with the stress and strain on the retirement security 
safety net in this country, we want to continue to be in the 
business of providing predictable, secure, fair retirement 
benefits for people that work 30, 40, some cases 50 years--not 
that many because the construction industry is, as you well 
know, Congressman, is a very difficult racket that is hard on a 
body over a 30-year period in the cold and the heat with the 
stresses that we take to make sure that we have got a good 
retirement security program for our membership.
    And our contractors, who are our partners, want to provide 
that, too. They are long-term employees of the companies who 
have helped to make those companies successful and they want to 
make sure that they get what they earn and they enjoy that 
retirement in a fair way that we all strive for in this 
country.
    So we are wholly committed to the continuation of these 
kinds of benefit plans for our membership and future 
generations in the industry that are going to come later on.
    Mr. Hinojosa. I am concerned in what I saw from 2008 when 
the deep recession kicked off and it is probably the worst in 
50 years for our country and so many businesses went out of 
business and many pension plans were lost. So this hearing 
today is something of great interest to us here in this 
committee.
    To what extent did the process of drafting the National 
Coordinating Committee for Multiemployer Plans' recommendations 
incorporate the views of both unions and employers? To you, Mr. 
McGarvey.
    Mr. McGarvey. Are you asking me the question is that 
happening?
    Mr. Hinojosa. Yes.
    Mr. McGarvey. I believe it is.
    Mr. Hinojosa. Say that again?
    Mr. McGarvey. I believe that is happening, that proposals 
are being drafted into legislative language.
    Mr. Hinojosa. And are you comfortable enough that is going 
to protect the participants of those employees?
    Mr. McGarvey. Well, I don't believe that you could ever 
create a piece of legislation that would be failsafe. There are 
lots of issues that this Congress will have to deal with as 
they work their way through it. But we are comfortable that the 
proposal that we put together through our commission, with all 
the private sector experts from across this country and all the 
people that are participating and managing multiemployer 
pension funds, that there is a good base of ideas on how we can 
attack some of the problems and, again, insure the future of 
multiemployer pension funds.
    Mr. Hinojosa. I yield back, Mr. Chairman.
    Chairman Roe. I thank the gentleman for yielding.
    I now recognize Ms. Wilson for 5 minutes?
    Ms. Wilson of Florida. Thank you, Mr. Chair.
    This is a very difficult issue that we are discussing 
today, but we must find a solution, and so we have to research 
and brainstorm until we can all come together and reach a 
solution.
    But as we begin addressing this very difficult issue, let's 
not forget one simple fact: We would not be in this position 
were it not for the dangerous risk-taking behavior that led to 
the 2008 financial crisis. And we as a society, we have an 
obligation to ensure that elders who have worked hard their 
entire lives are not forced to bear the burden of Wall Street's 
recklessness.
    In my district of Miami-Dade County, Florida there are 
thousands of retirees on fixed incomes who literally cannot 
afford changes of the kind we are contemplating today. With 
America's seniors living off of a median household income of 
less than 35,000, few could handle even minor reductions 
without sacrificing food, medicine, or housing.
    While it may seem unfeasible in today's political 
environment, I believe we must consider the options of, number 
one, Congress stepping in to rescue the seniors with the least 
means. I would like to associate myself with Mr. Scott and ask 
that we submit to the record testimony from the United Steel, 
Paper and Forestry, Rubber, Manufacturing, Energy, Allied-
Industrial and Service Workers International Union that 
suggests this is an important option.
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    Ms. Wilson of Florida. Mr. Certner, could you speak to the 
possible options for Congress to step in to rescue the most 
vulnerable retirees if the political will were there?
    Mr. Certner. I think what you have outlined does set up the 
problem correctly, which is that people who have worked hard 
and earned a pension were in an industry and under 
circumstances, both with the economy and with the stock markets 
that were, you know, quite frankly, historic and have put 
people in a very difficult situation.
    And there are options out there for the federal government, 
should they choose to weigh them too, right? I mean, there are 
potential loans; there are potential additional funds that 
could be applied here to help some of these what I understand 
are to be a small number of troubled funds in an entire 
industry. There are, I think, additional tools you could give 
the PBGC to allow them to step in to enable and help some of 
these plans.
    And we can foresee some of these options for the plans for 
the federal government, and one of the things that we are 
having a lot of difficulty, though, is seeing options for a 75-
year-old. I mean, what are they going to do? They are not going 
to be able to, you know, go back to work or continue to work 
longer. They are not going to be able to save more.
    They don't have options. And so that is why we think that 
there are--it is just impossible for us to think that there are 
not other options out there between what Congress can do, what 
the plans can do, what current participants can do, what the 
employers can do that can protect the accrued benefits of 
retirees.
    Ms. Wilson of Florida. Thank you.
    This is a question for everyone. Can you describe how due 
diligence must be exercised in deciding when and how to cut 
benefits? What is your opinion of due diligence?
    Mr. Certner. Let me just take it from one perspective, 
which is----
    Ms. Wilson of Florida. Okay.
    Mr. Certner.--one of the pieces in this plan that troubles 
us is that this proposal talks about cutting retiree benefits, 
and yet there are very little protections in place in that 
decision-making process. So the trustees of the plans are being 
given extremely broad discretion to cut benefits.
    So we are talking about benefits that have been earned over 
a lifetime under a very heavily statutory regulated ERISA 
regime, and suddenly we are just giving over to trustees broad 
discretion to make cuts with what I think are fairly few 
parameters. It is not clear to us what kind of a voice retirees 
have. Are they part of these discussions? Are they represented? 
Do they have information? Are they able to make the case for 
themselves?
    We don't see any of those protections for retirees. We 
don't see any distinction between retirees and other 
participants. We don't see differences in perhaps class of 
retirees. None of this is spelled out at all.
    So even if you were going to go that direction, which 
again, we think is the wrong direction, to do with such a vague 
and broad grant of authority to trustees to us seems to, again, 
fly in the face of ERISA's statutory protections.
    Mr. Nyhan. May I speak to that issue?
    You know, I agree with my colleague over here that one of 
the fundamental rules of ERISA was the anti-cutback rule. But 
that is another fundamental rule that is going to trump that 
and that is called arithmetic. It is not a question of if there 
are going to be benefit cuts. There are going to be benefit 
cuts. The question is when and how they are going to happen.
    And the question we need to determine, is there a way to 
provide a measure of retirement security--maybe not at the 
level that people thought they were going to get, but a 
meaningful measure of retirement security going on into the 
future? That is what we are dealing with here.
    I have been trying to protect pensions my entire life. I am 
all in favor of a massive bailout. If Congress were to enact it 
I would be the first person in line for it.
    But we tried for several years and we really didn't garner 
any support from either party, from either house, or the 
administration. So at this point I think we need to deal with 
reality, and the reality is that there are going to be some 
very substantial cuts to people to the point that they may have 
no pension whatsoever unless we do something. And that is what 
we are focused on.
    Ms. Wilson of Florida. Thank you.
    I yield back the balance of my time.
    Chairman Roe. Thank the gentlelady for yielding.
    I will now yield myself 5 minutes.
    And I want to start off by saying that I am 100 percent 
committed to trying to work this out to where we work the best 
solution for retirees that are out there. I have told you all 
and I have said this in the committee before that my father 
worked in a factory, was a union member, and before ERISA his 
job went away after World War II, almost 30 years in the plant, 
he got almost nothing in his retirement.
    I have been down that road. I was a young Army officer 
overseas at the time, and I didn't realize the struggle that my 
parents had. They were 50 years old. They didn't have a lot of 
time to recover. So I understand that.
    When I started my medical practice I made sure that we put 
the best pension plan we possibly could--and we have it 37 
years later--for the people that have worked for me. I have 
people who have worked for me for 37 years and we have provided 
them pension benefits, health benefits, dental, and so on, 
because that is the way you attract good workers.
    Here is the reality in the world we live in--and I remember 
when this--2008 I was the mayor of Johnson City, Tennessee and 
we were undergoing a big building boom. We had some--at our 
schools--we added about $50 million to $60 million in 
construction in schools.
    We had looked at the square footage cost of a new 
elementary school and we calculated it would be an $18 million 
school. That school was actually bid out for 13.5 million when 
it actually came to bid because people needed the work. That is 
how desperate the construction industry was in. So just to keep 
their people working they probably bid this at a loss.
    And so what the multiemployer plans have found themselves 
in is the ultimate Catch-22 and it probably is industry-
specific. If you look at Mr. Nyhan and the trucking industry, 
back in 1980 the trucking industry was doing very well and the 
construction industry, and what you said, Mr. McGarvey, it 
wasn't a recession; 25 percent unemployment. That is a 
depression in that industry and it hasn't recovered yet, and 
our economy, I don't think, will totally recover until 
construction recovers.
    So right now Mr. Nyhan has a situation where he has 410,000 
people he is providing benefits for but only 70,000 paying in--
half of those are orphaned--companies that went out of business 
that are providing no benefit for him. So he has done an 
amazing Houdini job to keep it where it is, I think.
    And I think the other ultimate Catch-22 was when times were 
roaring during the 1990s. By law you had to--you couldn't--
because I remember that if you had a defined-benefit plan you 
couldn't put more money or you were overfunded. That has 
subsequently been changed, and therefore you had to pay more 
benefits out, which you couldn't then because of the anti-
cutback rule. That was the ultimate Catch-22.
    The other Catch-22 you find yourself in is that, Ms. 
Duncan, in your business where you are providing, you have been 
great. You have paid for retirement benefits and you are paying 
for someone else's sins, and the more you pay the more it costs 
you to get out. So why would anybody get in if you have that 
sort of a scenario?
    So we have really created a perfect storm for these to 
downward spiral, and I think, Mr. McGarvey, I heard several 
things--and from Mr. Nyhan, too--that made a lot of sense to 
me, is to let--you are the one the closest to your retirees. 
You know them better than anybody. And I think to be able to 
save what benefits you have and to make them at the highest 
level, you will do that. I trust you to do that. You know more 
about what is going on in your plans than we will ever know.
    And I think, Mr. Nyhan, you brought out several great ideas 
that I would be willing to listen to. For instance, maybe means 
testing. Maybe somebody worked in a trade--drove a truck for 5 
years and now they are a successful attorney, or whatever. And 
that makes sense to me. Age, disability, sole survivors, length 
of time working--all of those are pieces of the puzzle that you 
can use, I think, to be able to solve this.
    This is our fifth hearing. Again, I have learned a lot at 
every hearing. I have learned we have got a difficult problem 
ahead of us and there are solutions out there if we turn you 
all loose to make them.
    I am going to finish, because I have talked all my time up, 
to make any comments that you all have about what I have just 
said. I think I have summarized the problem. Any comments?
    Mr. Nyhan?
    Mr. Nyhan. Well, I would just end by saying that the last 
thing we want to do as a pension fund is to cut anybody's 
benefits. That is not what we do and I don't believe there is 
anybody on either side in either party that wants to see that 
happen.
    The question is, how can we preserve what we have in light 
of today's reality, and this is what we see--this is the path 
that we see that we can preserve some measure. And it is not a 
matter of cutting, as people suggest, to PBGC minimums or 110 
percent. It is to get the highest benefit we possibly can and 
maintain solvency, which is above that number.
    But I might add, the longer we wait the deeper the cuts 
have to be.
    Chairman Roe. Well, just to finish out, to show on bidding 
for a contract, for instance, the cost--and this is Mr. Nyhan's 
comments in his testimony: The cost of funding these orphan 
benefits has grown to unaffordable levels. In an example, 
trucking industry employer contribution rates under the 
National Master Freight Agreement have increased from $170 a 
week in 2003 to over $340 per week--nearly $8.50 an hour for a 
40-hour week. That is about $16,000 a year per----
    Mr. Nyhan. Yes. And it is putting our employers at a very 
competitive disadvantage.
    Chairman Roe. And they can't get the contract and, like you 
said, and they can't contribute, and----
    Mr. Nyhan. Exactly right.
    Chairman Roe. I see the problem, and I absolutely 
understand it well.
    I will now yield to Mr. Andrews for any closing comments?
    And first of all, before I do, thank the panel. You all 
have done a terrific job. You have stayed under your time limit 
better than I have, and thank you for that.
    Mr. Andrews. Well, I would like to join in thanking each of 
the four of you for your preparation and eloquence today. I 
would like to thank those that submitted statements for the 
record, which will be reviewed in all respects.
    I want to thank Josh Gotbaum for being with us today, who 
has to deal with this problem every day as leader of the PBGC. 
His interest is appreciated and his partnership is appreciated.
    We have heard many diverse views today but I think we have 
heard some unifying ideas. Number one is that this is a real 
problem. It is not being exaggerated or trumped up; it is a 
real problem for a lot of people and has to be addressed.
    Number two, I think there is a shared goal to eliminate or 
minimize the reduction of any benefit for any retiree under any 
circumstances. No one here wants to do that.
    Number three, there are a lot of tools that could be 
considered to achieve that objective. Some are in the plan, 
some aren't in the plan, as it has been drafted thus far. And I 
think it is up to us to consider all those tools to try to 
achieve the best result.
    Number four, there is a taxpayer interest here. The PBGC is 
not very healthy right now, and if we don't do something to fix 
its health, the nature of our approach to this issue over the 
years is that somehow or another taxpayers are going to wind up 
on the hook for this. This country is not going to let 10 
million or 12 million people go without a pension check and it 
is going to reach into the federal treasury some way or another 
to fix that.
    I would rather do it smarter and earlier than later and 
worse, and I think that is one thing we ought to be 
considering.
    And finally--this is to the chairman's credit--that the 
five hearings we have had on this have been hearings that are 
designed to learn about the problem and try to fix it, not 
hearings that are designed to score political points on either 
side. The witnesses have been very much in that spirit today, 
and I appreciate that very, very much. And I am hopeful that we 
can go forward and listen to each other, listen to all voices 
in this and achieve the objectives that I have laid out here 
this morning.
    You know, I was on a call 5 years ago--when you were mayor 
of Johnson City I was here--and it was a small group, 12 or 15 
members, on a conference call with Chairman Bernanke from the 
Fed and with Secretary of Treasury Paulson at that time. And on 
this call the two of them said literally they thought we would 
have a global depression if the Congress did not act quickly to 
prop up the U.S. banking system.
    And we did. And although that was a very controversial 
vote, I think I cast the right vote by supporting it. Not one 
person lost $1 from an FDIC-insured account in this country 
because that decision was made. This is a smaller problem but 
it is equally important to 10 million or 11 million people 
across this country in its intensity, and they deserve our 
intensity.
    And I know that with your leadership we will work together 
and achieve that.
    Chairman Roe. I thank the gentleman. I associate myself 
with your comments.
    And just in closing, I want to thank the, again, the panel 
and all the panelists that have been here to sort of define 
this issue and problem. And the objective, as Mr. Nyhan clearly 
pointed out, is to maintain--and Mr. McGarvey--the highest 
benefit level that can possibly be done.
    And I think that can be done. I believe it can be. I think 
we have a commitment from both sides of the aisle to do that. I 
think both the chairman and ranking member of the full 
committee agree with that, and we are here to do that.
    And look, and I certainly understand with a 91-year-old 
mother at my house now that she can't go out and be the greeter 
at Walmart. I got that. I understand that. And we need to look 
at that, I certainly--and think our folks that have created 
this great country we have, we owe them an obligation--10.5 
million people--to do the very best job we can.
    And I want to ask you all, too, to help educate our 
colleagues. Because there are a few of us in here that are very 
well versed on this, but probably most of the Congress are not. 
So when you go around and speak to them that would be very 
helpful to us.
    I think the solutions we have heard, they are painful, they 
are not what any of us want, but I want to thank this committee 
today. I think you all, and certainly Ms. Duncan, coming all 
the way from Oregon to Washington to testify, I appreciate 
that, and certainly the AARP years.
    And then, Mr. McGarvey, I know you have chaired a very 
difficult committee, and thank you for all the hours and work 
you have put in on this issue and will continue to do so.
    And, Mr. Nyhan, you have had a very difficult situation 
with the $17 billion or so liability.
    I thank you for being here. I thank you. We will continue 
to listen. And we have a sort of a deadline. We know the PPA, 
some of the provisions run out at the end of 2014, which in 
Congress time is a short time--just a little over a year. So we 
don't have a lot of time to get this done and I look forward to 
working with a solution.
    With no further, this meeting is adjourned.
                                ------                                

    [Whereupon, at 11:42 a.m., the subcommittee was adjourned.]


                                APPENDIX

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               Material Submitted for the Hearing Record
               
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