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


 
                       PRIVATE EMPLOYER DEFINED
                         BENEFIT PENSION PLANS

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

                                HEARING

                               BEFORE THE

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                                 OF THE

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 17, 2014

                               __________

                            Serial 113-SRM04

                               __________

         Printed for the use of the Committee on Ways and Means
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


                         U.S. GOVERNMENT PUBLISHING OFFICE
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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                   Janice Mays, Minority Chief Cousel

                                 ______

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                   PATRICK J. TIBERI, Ohio, Chairman

ERIK PAULSEN, Minnesota              RICHARD E. NEAL, Massachusetts
KENNY MARCHANT, Texas                JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            ALLYSON SCHWARTZ, Pennsylvania
AARON SCHOCK, Illinois               LINDA SANCHEZ, California
TOM REED, New York
TODD YOUNG, Indiana

 
                            C O N T E N T S

                               __________

                                                                   Page

Advisory of September 17, 2014 announcing the hearing............     2

                               WITNESSES

Deborah Tully, Director of Compensation and Benefits Finance and 
  Accounting Analysis, Raytheon, Testimony.......................     6
R. Dale Hall, Managing Director of Research, Society of 
  Actuaries, Testimony...........................................    14
Scott Henderson, Vice President of Pension Investment and 
  Strategy, The Kroger Company, Testimony........................    24
Jeremy Gold, FSA, MAAA, Jeremy Gold Pensions, Testimony..........    34
Diane Oakley, Executive Director, National Institute on 
  Retirement Security, Testimony.................................    38

                       SUBMISSIONS FOR THE RECORD

AARP.............................................................    66
Church Alliance..................................................    80
National Center for Policy Analysis..............................    84
National Center for Policy Analysis.2............................    88
National Education Association...................................    89
The ERISA Industry Committee.....................................    91
United Brotherhood of Carpenters and Joiners.....................    99
U.S. Chamber of Commerce.........................................   101


     
            PRIVATE EMPLOYER DEFINED BENEFIT PENSION PLANS

                              ----------                              


                     WEDNESDAY, SEPTEMBER 17, 2014

             U.S. House of Representatives,
                       Committee on Ways and Means,
                   Subcommittee on Select Revenue Measures,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 10:19 a.m., in 
Room 1100, Longworth House Office Building, the Honorable 
Patrick Tiberi [Chairman of the Subcommittee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

 Chairman Tiberi Announces Hearing on Private Employer Defined Benefit 
                             Pension Plans

1100 Longworth House Office Building at 10:15 AM
Washington, September 10, 2014

    Congressman Pat Tiberi (R-OH), Chairman of the Subcommittee on 
Select Revenue Measures, today announced that the Subcommittee will 
hold a hearing on defined benefit pension plans offered by private 
sector employers, including both multiemployer plans and single 
employer plans. The hearing will take place on Wednesday, September 17, 
2014, in 1100 Longworth House Office Building, beginning at 10:15 A.M.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Subcommittee and 
for inclusion in the printed record of the hearing. A list of invited 
witnesses will follow.
      

BACKGROUND:

      
    Multiemployer (``ME'') pension plans collectively are less than 50-
percent funded, with underfunding exceeding $400 billion. The 
Congressional Budget Office estimates that the Pension Benefit 
Guarantee Corporation's (``PBGC'') ME insurance program, financed by 
premiums from ME plans and not backed by taxpayers, will run out of 
cash in 2021 and requires $9 billion over the next decade to pay 
statutory benefits. PBGC's projected ME deficit for 2023 is $50 
billion. With respect to ME plans that become insolvent: (1) retirees 
will receive a maximum annuity of $12,870 from PBGC until PBGC runs out 
of cash, and (2) employers will be subject to substantial withdrawal 
liability that can exceed the value of the employer.
      
    The current investment environment and low interest rates combined 
with increasing life expectancies also present challenges to single 
employer (SE) plans, although they generally are better funded than 
multiemployer plans. (PBGC projects a deficit in its SE program of $8 
billion for 2023.) Still, workers participating in, and employers 
sponsoring, such plans face a variety of challenges. For instance, 
employees whose employer is transitioning new employees into a defined 
contribution plan (e.g., a 401(k) plan) face the prospect of their 
employer being forced to freeze the defined benefit plan for all 
employees to avoid violating the non-discrimination rules. H.R. 5381, 
introduced July 31, 2014, by Chairman Tiberi, and H.R. 2117, introduced 
May 22, 2013, by Ranking Member Richard Neal (D-MA), are designed to 
protect longer-service participants in defined benefit plans that are 
closed to new entrants by allowing cross-testing between defined 
benefit and defined contribution plans. Other issues affecting single 
employer plans include the impact of the in-service distribution rules 
on employees' retirement schedules and the effect of mortality tables 
on funding requirements.
      
    In announcing this hearing, Chairman Tiberi said, ``I have heard 
for years now from hundreds of businesses and nonprofits about the need 
for pension reforms, especially for defined benefit plans. Increasing 
pension costs have hampered both the job growth and capital investment 
needed to grow the economy and have threatened retirement security for 
American workers. The cost of doing nothing is too high a price to pay. 
This hearing will give us the opportunity to examine challenges facing, 
and opportunities to strengthen, the defined benefit pension system.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on some of the challenges facing employers, 
employees, and retirees who rely on defined benefit pension plans to 
help provide retirement security. It will examine the funding rules 
governing multiemployer plans, as well as selected issues that affect 
single employer plans.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
written comments for the hearing record must follow the appropriate 
link on the hearing page of the Committee website and complete the 
informational forms. From the Committee homepage, http://
waysandmeans.house.gov, select ``Hearings.'' Select the hearing for 
which you would like to submit, and click on the link entitled, ``Click 
here to provide a submission for the record.'' Once you have followed 
the online instructions, submit all requested information. ATTACH your 
submission as a Word document, in compliance with the formatting 
requirements listed below, by the close of business on Wednesday, 
October 1, 2014. Finally, please note that due to the change in House 
mail policy, the U.S. Capitol Police will refuse sealed-package 
deliveries to all House Office Buildings. For questions, or if you 
encounter technical problems, please call (202) 225-3625 or (202) 225-
2610. 
      
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 -------

    Chairman TIBERI. Thank you for joining us today. This 
hearing will come to order. Good morning, thank you for joining 
us for our subcommittee hearing on Private Employer Defined 
Benefit Pension Plans. Today we examine the challenges facing 
employers, employees, and retirees who rely on both single and 
multi-employer defined benefit pension plans to help provide 
retirement security. These challenges pose serious threats to 
American workers and employers.
    I know what it means personally for a family to lose the 
pension they were relying on. When I was in high school my 
father lost his job. He lost his pension. We lost our health 
care. It was a volatile time, and I want families to avoid that 
type of situation.
    First I have heard from a number of companies with concerns 
that treasury rules relating to non-discrimination testing for 
single-employer defined benefit plans may cause plans to 
freeze, and participants to lose their benefits. In response to 
this issue, Ranking Member Richard Neal and I have introduced 
legislation to offer non-discrimination testing to close 
pension plans. It would prevent companies from having to freeze 
their plans, and would prevent thousands of participants from 
losing their benefits.
    There are a number of other issues currently affecting 
private defined benefit pensions, and it is my hope that this 
hearing will give us an opportunity to gain a different 
perspective or perspectives on these issues.
    The funding challenges facing multi-plans are threatening 
both retirement security for American workers and the solvency 
of employers, whose ability to invest and create jobs is being 
hampered by these pension obligations. I have said it for 
years: The cost of doing nothing is too high of a price to pay.
    I applaud Chairman Kline and the Education Workforce 
Committee on their work on the issue, as well. I look forward 
to gaining as much information as possible, as we determine an 
appropriate path forward to deal with these very important 
issues.
    I thank our witnesses for being here, and now yield to 
Ranking Member Neal.
    Mr. NEAL. Thank you, Mr. Chairman. Thanks for calling this 
timely hearing. A reminder to the audience that it is almost to 
the day--six years--since America witnessed the financial 
collapse and the near end of our economic system, as reminded 
at the time by the Secretary of the Treasury and the Chairman 
of the Federal Reserve Board. So I think that this issue 
continues to be timely.
    For those of us who were members of the House at that time, 
to stand in the well of the House and to watch the stock market 
in one hour dip by 700 points is compelling evidence of what I 
think that this hearing is about today. So I do want to 
acknowledge--and, by the way, that personal perspective that 
you offered is telling, because one of the questions that is 
seldom is ever raised by the media is how do we come to our 
conclusions, and much of it is based on our own personal 
experience, as it is with the witnesses today.
    So, I want to thank you for the hearing. It is an issue 
that deserves our much-needed attention. And it is my hope that 
we will have an opportunity to use the hearing as a catalyst 
for action.
    It is also fitting that we are calling this hearing days 
before we celebrate the 40th anniversary of the passage of 
ERISA. Before ERISA there was little to no protection for 
American workers enrolled in pension plans. In fact, there were 
high-profile cases of Americans losing their retirement 
benefits.
    Congress responded to this crisis by passing ERISA. Today 
ERISA serves as an example for us to follow, standing as a 
testament to how working together in a bipartisan way ensures 
Americans have access to financially secure retirement. 
Unfortunately, it took Americans losing their retirement 
benefits before Congress responded. Today we should not allow 
the same thing to happen before we act.
    We are at the precipice of an impending retirement crisis 
in America that is seemingly twofold: Americans are not either 
saving enough, or, at retirement time, we are seeing changes to 
defined benefit plans. And, often times, those plans are 
considered to be underfunded. It astounds me in this day and 
age that half of the people that get up and go to work every 
day in America are not in a retirement plan.
    We know the statistics. The United States has a retirement 
deficit of $6.6 trillion and PBGC estimates that, for the next 
decade, private sector employer defined benefit pension plans 
are going to carry a significant deficit. These staggering 
statistics demonstrates that we, as Americans, need to do more 
to prepare for our financial future. We must do all we can to 
encourage more individuals to save, whether through financial 
literacy programs, or through the Tax Code. Now is not the time 
to cut the hard-earned benefits of millions of Americans.
    It has been put forward by some that the best way to 
address the private sector DB pension deficit is to cut 
benefits. I could not disagree more. Pension benefits have been 
earned through hard work, and these employees have relied on 
these guarantees to fund their retirement. Before looking to 
cut those earned benefits, we need to look at our current 
funding rules, along with the insurance guarantee through the 
PBGC to see if there are ways to reform the current system 
before looking to cut benefits. Remember that if PBGC is not 
strong, then the guarantees given to workers are eroded.
    Many new entrants into the private sector workforce will 
never know the security of a defined pension plan, which 
provides the employee predictable and secure benefits for life. 
Under DB plans, workers are promised a specific benefit at 
retirement, a benefit they know in advance, and one that is not 
subjected to the vagaries of the markets.
    We can only look to previous decades for example of the 
perils of investing solely in the stock market, whether the 
401(k) tragedies of Enron, WorldCom, or the financial meltdown 
in 2008 comes to mind.
    I commend the chairman for calling this hearing. It is 
extremely important for us to find a solution to the problems 
vexing the private sector defined benefit plans, and to hear 
solutions that will be put forward today, solutions that 
maintain the integrity of the defined benefit, and ensures that 
the promises made will be the promises kept.
    And I thank the chairman. I am personally delighted that 
you used your personal example of what happened to your dad. In 
my case, one of the reasons I have been such a fervent 
supporter of Social Security, when my parents died, that is how 
we lived, survivor benefits. And again, it is the personal 
experience that one has as they come to this institution, and 
how they see the development of what ought to be happy years, 
retirement years.
    Thanks, Mr. Chairman.
    Chairman TIBERI. Thank you, Mr. Neal, for your leadership.
    Before I introduce today's witnesses, I ask unanimous 
consent that all Members' written statements be included in the 
record.
    [No response.]
    Chairman TIBERI. Without objection, so ordered.
    Let me get to the witnesses. Deborah Tully, director of 
compensation and benefits finance accounting analysis at 
Raytheon in Massachusetts, thank you for being here.
    R. Dale Hall, managing director of research at the Society 
of Actuaries in Illinois. Thank you.
    Scott Henderson, vice president of pension investment and 
strategy for the Kroger Company in the great state of Ohio. 
Thank you.
    Jeremy Gold, Jeremy Gold Pensions in New York City. Thank 
you.
    Last, but not least, Diane Oakley, executive director of 
the National Institute on Retirement Security here in 
Washington, D.C.
    I will remind all of you that you have 5 minutes to present 
your oral testimony. Your full written testimony has been 
submitted for the record.
    Ms. Tully, we will begin with you.

   STATEMENT OF DEBORAH TULLY, DIRECTOR OF COMPENSATION AND 
       BENEFITS FINANCE AND ACCOUNTING ANALYSIS, RAYTHEON

    Ms. TULLY. Good morning, Chairman Tiberi, Ranking Member 
Neal, and committee members. I am Deborah Tully, director of 
compensation and benefits finance at Raytheon Company. I am a 
fellow of the Society of Actuaries, and an enrolled actuary 
responsible for reporting compliance and financial analysis for 
Raytheon's retirement benefit programs. Thank you for the 
opportunity to address the subcommittee on pension matters, 
specifically the non-discrimination testing regulations as they 
apply to closed plans.
    Before I do so, let me give some background on Raytheon and 
our retirement programs. Raytheon is a technology and 
innovation leader, specializing in defense, security, and civil 
markets throughout the world. Founded in 1922, Raytheon is 
headquartered in Massachusetts, and has 61,000 employees. Our 
2013 net sales were $24 billion.
    Raytheon has maintained defined benefit plans, or DB plans, 
since 1950, and defined contribution, or DC retirement plans, 
since 1984. Closed to new employees hired after 2006, 
Raytheon's DB plans covered approximately 172,000 people. 
Raytheon's DC covers 92,000 people, and is made up of two 
components: a 401(k) plan with a company match, and a 
supplemental DC plan for employees hired after 2006.
    Like many companies, we have been transitioning from a DB 
retirement model to a DC model, most notably by closing our DB 
plan to new employees, and offering them a DC plan, while 
continuing to provide the DB plan to employees hired before 
2007. This gradual change minimizes the impact to existing 
employees, while providing the greatest opportunity for new 
employees who are enrolled in the DC plan to maximize their 
retirement benefit.
    Under the Internal Revenue Code, DB plans must meet certain 
non-discrimination testing standards to ensure that they do not 
discriminate in favor of highly-compensated employees. IRS 
rules generally define highly-compensated employees as those 
earning more than $115,000 annually. To satisfy non-
discrimination requirements, a DB plan must pass three types of 
tests, which often involve complex actuarial calculations to 
ensure that a plan is not discriminatory.
    For a plan that is closed to new participants, each of 
these tests gets more difficult to pass over time, which 
ultimately could jeopardize the tax-qualified status of the 
plan, unless the employer makes changes. This occurs because 
the group of employees earning benefits under a closed plan 
will gradually have longer service, and will have earned 
compensation increases over their careers. Over time, those 
compensation increases will cause many employees to be treated 
as highly compensated, and, as a result, the plan will risk 
failure. Each year, more and more employers are facing this 
issue, as the demographic profile of their closed DB plan 
evolves.
    Under current regulations, an employer has limited options 
to ensure compliance if its closed plan is at risk of failure. 
While some employers take interim steps to modify their plans, 
such as removing some highly-compensated employees from the 
plan, or changing certain features of the plan, these fixes are 
only temporary solutions. Ultimately, many employers choose to 
fully freeze their plans, since this is the only permanent 
solution to the problem.
    A full plan freeze means that employees will no longer earn 
benefits in the DB plan. This negatively impacts mid- to late-
career employees, who are about to earn the most significant 
portion of their retirement benefit, since the most valuable 
accruals under a DB plan occur towards the end of an employee's 
career.
    Another option to avoid testing non-compliance is to reopen 
the pension plan to employees who are not in the plan. While 
every company has to evaluate their plan design, demographics, 
and financial situation based on their specific circumstances, 
this is an unlikely choice for most employers, given the trend 
away from DB plans and toward DC plans, and the fact that many 
competitors do not offer DB plans to new employees.
    In response to the ongoing concern surrounding non-
discrimination testing, the Treasury Department issued non-
discrimination testing relief late last year for certain closed 
DB plans. Valid through 2015, the relief allows employers to 
combine their DB and their DC plans for non-discrimination 
testing, referred to as cross-testing, as long as the plan 
satisfied certain criteria before the end of 2013. This allows 
employers to take the DC benefits offered to all employees into 
consideration when evaluating the level of benefits being 
provided.
    This temporary relief is very much appreciated, and 
reflects progress. However, it is not a complete solution. 
Since it does not address all of the testing requirements, many 
employers could still face testing failure.
    In closing, employers who have chosen to maintain their DB 
plans for some employees as they transition to a DC plan for 
others, will face non-discrimination issues at one point or 
another under the current regulations. While employers may have 
near-term options to avoid failure, a long-term solution is 
needed in order to allow employees to continue to earn benefits 
under the DB plan.
    We believe that H.R. 5381, introduced by Chairman Tiberi 
and Ranking Member Neal, is a bipartisan solution that 
addresses many of these non-discrimination testing concerns. 
Under current regulations, we are penalizing employers who have 
chosen to make a gradual transition from DB to DC retirement 
programs, rather than taking a more abrupt approach. Without a 
long-term solution, non-discrimination regulations will further 
drive employers to exit the DB system at the expense of the 
participants that the regulations were intended to protect.
    Thank you for the opportunity to speak today, and I look 
forward to answering any questions you may have.
    [The prepared statement of Ms. Tully follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    

                                 ------

    Chairman TIBERI. Thank you.
    Mr. Hall, recognized for 5 minutes.

   STATEMENT OF R. DALE HALL, MANAGING DIRECTOR OF RESEARCH, 
                      SOCIETY OF ACTUARIES

    Mr. HALL. Thank you, Mr. Chairman, Mr. Ranking Member. 
Thank you for the opportunity to testify today. My name is Dale 
Hall; I am managing director of research at the Society of 
Actuaries. SOA is an educational, research, and professional 
organization of more than 24,000 actuaries worldwide. We 
conduct a wide range of research to provide technical resources 
to advance the knowledge and capabilities of our profession, 
and to inform public policy development. One thing the SOA does 
not do is take positions on specific policy proposals; we are 
not an advocacy organization.
    As we begin this discussion, I think it would be helpful to 
understand that our retirement plan mortality studies generally 
include two parts. The first is a mortality table, which 
contains data on the actual death rates of a given population, 
including any relevant subgroups. And the second part is an 
improvement scale, which is an experience-based estimate on 
expected rates of improvement in longevity of a population over 
time.
    The SOA has long been the primary source for mortality and 
mortality improvement studies on U.S. private-sector defined 
benefit plans. SOA studies on retirement mortality date back to 
the early 1950s.
    The Secretary of the Treasury establishes the mortality 
assumptions to be used to calculate certain liabilities for 
pension plans. The SOA conducted a study in the 1990s of 
uninsured pension plan mortality to ensure that the Treasury 
Department would have current and thorough information 
available for this process. The result of that study was the 
release in 2000 of the SOA's RP 2000 Mortality Tables, and a 
reaffirmation of our Mortality Improvement Scale AA.
    As part of its periodic review of retirement plan mortality 
assumptions, the SOA's retirement plans experience committee 
initiated a new pension study in 2009. A request for data was 
sent out to retirement plans, and plan experience was 
ultimately collected from calendar years 2004 to 2008. And the 
result of that study was the draft release of our RP 2014 
mortality tables this past February. The draft table is based 
on a large set of data that represents about 10.5 million life-
years of experience, and over 220,000 deaths.
    That committee also focused on providing an updated model 
for mortality improvement on retirement programs. That study 
culminated with the draft release of the MP 2014 Mortality 
Improvement Scale this past February. The MP 2014 report 
provides a model for mortality improvement rates that would be 
applied to the RP 2014 mortality table for use in future 
calendar years.
    Both RP 2014 and MP 2014 were exposed for a 120-day comment 
period from February to May. The SOA is now working to review 
and respond to those comments. We are working towards 
publishing final tables and reports by a target completion date 
of October 31, 2014.
    The exposure draft for RP 2014 does estimate the financial 
impact on transitioning from currently-used mortality tables 
and improvement scales to the new RP 2014/MP 2014 basis. When 
comparing the change from the 2000 mortality study to the 2014 
mortality study, the SOA estimates the general change in a plan 
liability calculation would be an increase of 4 to 8 percent, 
depending upon the plan's demographics.
    My written testimony has a detailed discussion of the 
regulatory uses of mortality tables, I will just summarize them 
briefly here.
    The Pension Protection Act of 2006 amends the minimum 
funding requirements for single-employer plans. It also 
requires the Treasury Department to review mortality rates 
every 10 years. In setting these funding requirements, the 
Treasury Department has frequently referenced our RP 2000 
Mortality Table and Improvement Scale AA. We anticipate the 
Treasury Department will carefully review our upcoming RP 2014 
and MP 2014 studies and utilize them as they see fit.
    In conclusion, the effort to develop this new mortality 
study has been a five-year undertaking that has involved many, 
many highly qualified actuaries. Key decisions have been 
validated by independent committees, and the work has been 
peer-reviewed at multiple points in the process. The SOA 
process for experienced studies is open and transparent, and we 
seek input and objective analysis from a broad range of 
experts.
    We have approached this project with a great deal of rigor, 
because of the very important uses of these mortality tables 
and mortality improvement scales. We believe it is critically 
important for professional actuaries to have access to reliable 
and well-supported data so they, in turn, can provide 
meaningful projections to the broad range of stakeholders 
responsible for governing private pension plans.
    I appreciate this opportunity to testify on behalf of the 
Society of Actuaries, and I look forward to answering any 
questions you may have.
    [The prepared statement of Mr. Hall follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]     

                                 ------

    Chairman TIBERI. Thank you, Mr. Hall.
    Mr. Henderson, you are recognized for 5 minutes.

    STATEMENT OF SCOTT HENDERSON, VICE PRESIDENT OF PENSION 
          INVESTMENT AND STRATEGY, THE KROGER COMPANY

    Mr. HENDERSON. Thank you, Chairman Tiberi, Ranking Member 
Neal, and Members of the Subcommittee. Thank you for this 
opportunity to testify on the state of the multi-employer 
pension system. My name is Scott Henderson, I am vice president 
of pension investments and strategy for The Kroger Company. I 
am also an employer trustee on two of the largest multi-
employer pension plans in the food industry.
    Kroger is one of the largest retailers in the world. We 
operate in more than 2,600 stores and 34 states. We are also 
one of the largest unionized employers in the United States. We 
employ more than 375,000 associates, a majority of whom are 
represented by labor unions. In the past six years we have 
created 40,000 new jobs. We have hired more than 22,000 
veterans, and we recently announced plans to hire 20,000 
individuals for new, permanent positions. We also participate 
in 36 multi-employer pension plans.
    Combined, these plans manage over $70 billion in assets, 
and have more than $100 billion in associated liabilities. 
Needless to say, this issue is very important to us.
    The uncertain fate of the multi-employer system is a huge 
concern to our associates, our retirees, and our company. The 
system is at great risk, and it threatens the retirement 
security of millions of Americans.
    I want to focus on five points: one, the multi-employer 
system is broken, and desperately needs reform; two, many plans 
are headed for insolvency; three, the PBGC's multi-employer 
insurance fund is also headed for insolvency; four, labor and 
management trustees, working together and with the PBGC, need 
new tools to adjust accrued benefits in the most severely 
funded plans; and, five, Congress must act now.
    My first point is that the system needs reform. My written 
statement describes the fundamental problems with the multi-
employer pension system. It was designed more than 65 years 
ago. Few would have predicted that today's contributing 
employers would become responsible for the risk of unfunded 
liabilities left by previous employers. Existing employers are 
leaving these plans to avoid this risk. New employers refuse to 
join because the plans are in trouble. And the remaining 
employers are unable to act because of the growing liabilities 
they face. It creates a spiral that is nearly impossible to 
reverse.
    And that leads to my second point. Many plans are severely 
underfunded now, and will become insolvent within a decade. The 
PBGC estimates that nearly 1.5 million participants are at 
serious risk because their plans are severely underfunded. In 
Kroger's case, most of the plans we participate in are stable, 
yet a few large plans--Central States in particular--will fail 
without immediate reform. When these plans fail, many 
participants will experience dramatic benefit reductions.
    The failure of these plans will threaten the viability of 
contributing employers and other plans, creating a domino 
effect, which leads to my third point. As more plans fail, the 
demands on the PBGC will compound. Congress created the multi-
employer insurance fund as a backstop to assist funds in need. 
No one anticipated the profound impact of changes in 
demographics, the contraction in the trucking industry, stock 
market shocks, and other factors.
    The unfortunate reality is that the insurance fund is 
headed for insolvency. Several government agencies have reached 
the same conclusion, including the PBGC itself, in its most 
recent projections reports. The Congressional Budget Office 
projects that the multi-employer fund will be exhausted by 
2021. For contributing plans, it is like paying premiums to an 
insurance company that we know is going out of business. And 
when the PBGC becomes insolvent, the retirement benefit for 
millions of Americans may disappear, as well.
    This leads to my fourth point. To save these plans, 
trustees need new tools. In extreme cases, we need the ability 
to adjust accrued benefits. Last year the NCCMP issued a report 
entitled, ``Solutions, Not Bailouts.'' Among these 
recommendations was that labor and management trustees, working 
together, be permitted to adjust benefits and plans that will 
otherwise become insolvent. Importantly, this proposal will 
succeed in preserving benefits without relying on taxpayer 
dollars. Adopting this proposal will involve difficult 
decisions, but the alternatives are far worse.
    I completely agree with Tom Nyhan of Central States when he 
testified last year--and I quote--``There is another 
fundamental rule that is going to trump the anti-cutback rule, 
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 that is my final point. Congress must act now. We 
cannot wait until 2021, or even 2016. Trustees need new tools 
to delay and minimize benefit cuts as much as possible, and 
save the retirement benefits of millions of Americans.
    I am looking forward to working with this Subcommittee, and 
I thank you for the opportunity to appear today.
    [The prepared statement of Mr. Henderson follows:]
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    Chairman TIBERI. Thank you, Mr. Henderson
    Mr. Gold, you are recognized for 5 minutes.

   STATEMENT OF JEREMY GOLD, FSA, MAAA, JEREMY GOLD PENSIONS

    Mr. GOLD. Chairman Tiberi, Ranking Member Neal, and Members 
of the Subcommittee, thank you for the opportunity to present 
my views with respect to private employer defined benefit 
pension plans. My views are my own, and do not represent any 
other persons or organizations.
    I am an independent consulting actuary and economist, 
specializing in the financial aspects of pension plans. I will 
address the measurement of liabilities and costs of multi-
employer pension plans. My central message is that liabilities 
are understated by as much as 50 percent, and annual costs are 
underestimated by as much as 100 percent. Good policies cannot 
be based on bad numbers.
    Actuaries performing valuations for multi-employer plans 
have always been challenged by employers wanting lower costs 
and employees wanting larger benefits. Circa 1980, with 
Treasury bond yields in double digits, naturally conservative 
actuaries were discounting benefit promises at interest rates 
below seven percent. By 2000, with equity markets soaring, and 
Treasury rates in the neighborhood of 6 percent, actuaries were 
discounting at about 8 percent. Since 2000, although Treasury 
rates have fallen to about 3 percent, indicating a widespread 
decrease in interest rates, and a commensurate share increase 
in liabilities, actuarial discount rates have, for the most 
part, held steady.
    The desires of employers and employees make it all but 
impossible for consulting actuaries, with the best of 
intentions, to lower discount rates accordingly. The result is 
that liability values are severely understated, costs are 
underestimated, and actuarial assumptions have been too 
optimistic.
    Once a deficit develops, once there is a hole in the 
ground, there are only two ways to fix the problem: smaller 
benefits for employees, larger costs for employers. The 
proposals being discussed are very reasonably some combination 
of these two approaches. I am agnostic as to how much benefits 
should be cut versus how much additional cost should be borne 
by employers.
    My message is this: unless accurate estimates of future 
costs are on the table and open for all to see, the combination 
of benefit cuts and employer costs, increases, will not reduce 
the deficit, will not fill the hole. On the contrary, the hole 
will get bigger unless two necessary steps are taken: first, 
get the right price for all future benefit accruals, and make 
sure, at an absolute minimum, that these are paid; second, 
accurately measure the deficit and decide when, how, and who 
pays to fill the hole.
    How can we get the right price--Actuaries trying to balance 
the needs of employees and employers cannot be expected to push 
valuations uphill when the interested parties want to go 
downhill. I believe that the concept of an independent 
consulting actuary putting a value on these benefits is 
irreparably flawed. The parties setting the price must have 
very significant skin in the game and capital at risk. The 
party that sets the price must also guarantee the benefits and 
hold sufficient capital to make good on its guarantee.
    The need to have capital at risk guaranteeing benefit 
promises implies something like insurance companies with 
actuaries whose primary obligation is to the company that puts 
up the capital, guarantees the benefits, and employs the 
actuary. These institutions do not--the institutions I have in 
mind do not have to be insurance companies as we know them, but 
they must combine capital, benefit guarantees, and actuarial 
expertise.
    In summary, we should measure accrued liabilities and 
future costs accurately. Accurate measurements will only be 
made by parties with skin in the game, combining capital, 
benefit guarantees, and actuarial expertise. To avoid making 
matters worse than they already are, plans must, at an absolute 
minimum, pay the full price for newly-earned benefits, or 
reduce accruing benefits to match available funding, and we 
must pay the interest on unfunded accrued liabilities.
    Thank you.
    [The prepared statement of Mr. Gold follows:]
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    Chairman TIBERI. Thank you, Mr. Gold.
    Ms. Oakley, you are recognized for 5 minutes.

    STATEMENT OF DIANE OAKLEY, EXECUTIVE DIRECTOR, NATIONAL 
                INSTITUTE ON RETIREMENT SECURITY

    Ms. OAKLEY. Thank you, Chairman Tiberi, Ranking Member 
Neal, Members of the subcommittee, for the opportunity to 
testify here today. I am Diane Oakley, the executive director 
of the National Institute on Retirement Security. We are a non-
partisan research organization working in the retirement 
security space.
    Defined benefit plans enable Americans to be self-
sufficient. They provide businesses the workforce management 
tool, and they support the U.S. economy. Employees value the 
predictable income that lasts, giving them independence after a 
lifetime of work. Employers value the cost-effective tool for 
recruitment, retention, and managing their workforce.
    Forty years ago, the Employee Retirement Income Security 
Act became law, bringing financial certainty to private-sector 
workers. Nobel economist Robert Merton recently summed up the 
primary question of concern for retirement savers: Will I have 
sufficient income in retirement to live comfortably--
    Congress had the right focus in 1974, with ERISA: 
retirement income security. The typical 1970s American was 
identified as a 47-year-old housewife who lived with her 
mechanic/machinist husband in the chairman's state of Ohio, 
just outside of Dayton. His blue-collar job had a pension that, 
combined with Social Security, would provide $12,000 of income, 
a middle-class income in that time.
    Typical American profile is quite different today. With 
less access to pensions, they are extremely worried about their 
retirement. Eighty-five percent of Americans are concerned 
about their retirement prospects, and fifty-five percent are 
very concerned. For Americans with DB pensions, it is easier to 
address Merton's question on retirement security. If someone 
works for 30 years, if they have a pension, perhaps they can 
replace 45 percent of their pre-retirement income.
    Pension income helps older households keep them out of 
poverty. Retirees with pensions today rely less on public 
assistance, which saved governments $8 billion in 2010 alone. 
Yet, at the same time, 55 percent of older, middle-income 
households relied on pension income to stay middle class.
    Unfortunately, pension income is declining for retirees. In 
1998, 52 percent of older Americans had a pension income. By 
2000 that had fallen to just 43 percent. Households today in 
the workforce near retirement represent the last generation of 
American workers with widespread pension coverage. Sixty 
percent of households between ages 55 and 64 have some type of 
DB plan, while those younger than 45 have pension coverage at 
half that level.
    Today workers are more likely to rely on an individual or 
retirement account, like a 401(k), which can fluctuate 
dramatically with stock markets, and can be outlived. The shift 
from DB also is a loss for local economies. Pension steady 
income, regardless of stock market fluctuations, means that 
they are considered economic stabilizers during economic 
downturns.
    In 2012, private-sector DB plans paid $167 billion to 13 
million retirees from private-sector employers, giving them an 
annual benefit of about $14,000, on average. Spending from 
those benefits collectively supported 2.3 million jobs in 
America, and generated $347 billion in economic output, and 
provided $50 billion in federal, State, and local income taxes.
    Fueled in part by changes in the nature of the private-
sector workforce, as well as accounting and government 
regulations that created more volatility and less predictable 
balance sheets, many private employers offering pensions have 
chosen to freeze workers' DB plans. The Bureau of Labor 
Statistics indicates that 10 percent of all private employers 
offering new employees DB pensions today only covers about 18 
percent of that workforce.
    Reflecting this trend, 45 percent of workers with pensions 
are concerned that their employers will reduce their pension, 
and 37 percent are concerned that they will close their plan. 
The switch to DB plans carries counter-cyclical risks for 
employers, such as increased severance pay, higher benefit 
costs, and results in lower mobility within organizations.
    Studies have found that employers with DC plans are finding 
older employees staying on in the workforce, and causing choke 
points in their talent pipelines. But we have also seen a 
recent trend with Kodak, for example, which announced that it 
will improve its DB plan, while foregoing its employer match in 
its 401(k).
    With the disappearance of secure, predictable retirement 
income, and declines in overall workplace coverage, the 
American workers face a retirement savings burden that is 
heavier and more troubling than ever before. Recently, the 
Federal Reserve released a survey of American workers' well-
being, and what they found is, even though workers today have 
more responsibility for their own retirement, most Americans 
give no, little, or just some thought to planning for 
retirement. For those who do plan, their plan is to keep on 
working and Social Security. In----
    Chairman TIBERI [continuing]. If you can----
    Ms. OAKLEY [continuing]. 1991, a researcher commented----
    Chairman TIBERI. Ms. Oakley, if you can wrap it up, your 
time has expired.
    Ms. OAKLEY. To reach the second hundred years of pensions, 
I think we need to make sure we keep the pensions we have 
today, find new ways to encourage pensions, and keep everyone's 
DB plan Social Security.
    [The prepared statement of Ms. Oakley follows:]
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                                 -----

    Chairman TIBERI. Thank you.
    Ms. OAKLEY. Thank you.
    Chairman TIBERI. Thank you all. Very good testimony.
    Ms. Tully, begin with you. You mentioned that the Treasury 
Department has released temporary relief through 2015, which, I 
do agree, is a welcome progress. It is my understanding that 
they have also sought comments on some additional possible 
approaches that they may take. Can you comment on that--Would 
that be helpful--Would that be something that would solve the 
problem that you outlined in your testimony----
    Ms. TULLY. Yes, thank you, Chairman. As you mentioned, 
Treasury did provide relief late last year. And, as a part of 
that relief, in their notice they actually did request comment 
on several possible proposals for potential solutions. And 
while those solutions may potentially help some employers, due 
to their complexity, and the limited nature of those solutions, 
we understand from industry organizations that a majority of 
employers will likely not be able to utilize those potential 
solutions, and even would have a challenge utilizing some 
combination of those.
    And that is why we actually support a long-term solution, 
such as what is put forth in the Neal-Tiberi bill over what 
some of these potential complicated Treasury solutions are.
    Chairman TIBERI. So you mentioned the long-term solution.
    Ms. TULLY. Yes.
    Chairman TIBERI. And without it, in your testimony, you 
mention that employers might be heading for the exits with 
respect to those important plans that Ms. Oakley just talked 
about.
    Ms. TULLY. Yes.
    Chairman TIBERI. Can you expand on that, from where you 
sit, as someone who has to deal with reality and not what we 
would hope would happen----
    Ms. TULLY. Absolutely. So, as I mentioned in my testimony, 
as companies start to come across these non-discrimination 
testing issues, there are some potential near-term solutions 
that they can use to solve the problems, such as removing some 
highly-compensated employees from their plans, or tweaking 
their plan design. But, again, those become very temporary 
solutions.
    So, from a practical standpoint, when an employer is 
actually evaluating their choices, and realizing that they need 
to operate this defined benefit plan, or their retirement 
programs in general to provide, hopefully, consistent benefits 
to their employees, they have to make choices for--based on 
their business circumstances, based on their competitiveness.
    And, often times, we are seeing companies are making a 
choice simply to fix the non-discrimination testing issue 
permanently, and move directly to a plan freeze, when, in 
reality, these are exactly the companies that are--were 
initially trying to make a more gradual transition to that type 
of a program, and now they are faced with having to make it 
permanently through a plan freeze.
    Chairman TIBERI. Thank you. Mr. Henderson, you correctly 
mentioned in your testimony--both your written and your oral 
testimony--that CBO projects that The PBGC multi-employer 
insurance fund will be exhausted by 2021.
    My question is that even the plan that you and I support 
that you mentioned--solutions, not bail-outs--even if that were 
signed by the President--and that is an assumption at this 
point, because stakeholders aren't quite all there yet--but 
assuming that we ultimately get there, PBGC still estimates 
that it would need an additional $1.4 billion per year to have 
a 50 percent chance of avoiding insolvency.
    You are an expert in this area, and not everybody is, on 
the multi-side, in particular. Any thoughts on how we solve the 
rest of the problem, once we have--we figure out the first 
part----
    Mr. HENDERSON. Thank you, Chairman, yes, I do. The NCCMP 
proposal includes a number of recommendations. And in total, 
what I think the--those recommendations are designed to do are 
to keep today's liabilities inside the plans where they 
currently exist, and give trustees, both employer and union 
trustees, new tools with which to address the issues. And, in 
my experience, every single plan that I am on, and the other 
plans I have looked at, they are all different, and they all 
require unique solutions to solve the problems that they have.
    So, I can't argue with the contention of some that the, you 
know, premiums may need to be adjusted by plans contributing to 
PBGC. But there are a number of other tools that we need. And, 
in fact, I think one of the main solutions is to keep 
liabilities inside the plans as long as we can, give trustees 
the ability to extend the solvency of those plans as long as 
possible, and thereby avoid, as long as possible, any benefit 
cuts.
    Chairman TIBERI. Thank you. One final question before I 
turn it over to Mr. Larson. Mr. Hall, I am not an actuary; I 
don't think anybody up here is, other than maybe Mr. Young. Can 
you explain to in English what you said, and what it means----
    [Laughter.]
    Chairman TIBERI. And here is what I am getting at, because 
I think you made news. The bottom line, with respect to the new 
report that you are going to issue at the end of December, what 
does the new data show, in terms of life expectancy and 
longevity versus what Ms. Tully is going to have to deal with, 
or Mr. Henderson is going to have to deal with, with respect to 
their employees.
    Mr. HALL. Sure.
    Chairman TIBERI. Living longer, I think, is what you said.
    Mr. HALL. Yes, thank you, Chairman. We will try to do that.
    The RP 2014 tables, especially compared to The RP 2000 
tables, the comparison, just to give you a flavor of some of 
the increasing life expectancies--I don't think it is brand new 
news that people are living longer, but a life expectancy, for 
example, for a male who reaches age 65, a retirement age, would 
be around 82.1 under the old tables. Under the new tables, it 
increases to 84-and-a-half, so about 2 to 2-and-a-half years of 
extension. The same for females, where we move from 84.6 years 
for those who reach age 65, extending out to about 86-and-a-
half for females. That is a table comparison without any 
improvement, but those are the types of increases in longevity 
that we are seeing, as we move from one table to the next.
    Chairman TIBERI. So if you were working for a company and 
you are in charge of pension plans, this is a big deal. Defined 
benefit plans.
    Mr. HALL. Yes, the--you know, we will leave it to the 
employers to make those decisions, but longevity is certainly a 
risk that employers face.
    Chairman TIBERI. Thank you, Mr. Hall. Speaking of 
longevity, I turn to Mr. Larson from Connecticut.
    [Laughter.]
    Chairman TIBERI. He has been here a long time.
    Mr. LARSON. I thought he was going to say age before 
beauty. But I thank my----
    Chairman TIBERI. You are recognized for six minutes because 
you have such a great----
    Mr. LARSON. Well, I think The beauteous chairman for his 
comments, and also I want to thank him and Ranking Member Neal 
for both their legislation, and putting this panel together, 
and this compelling testimony as well.
    It is clear, when it comes to multi-employer pension plans, 
that we are facing a dire and critical situation. I am also 
reminded, though, of the great wizard of Westwood--I think the 
actuary will know who that is--John Wooden, who said, ``You 
must be quick, but don't hurry.''
    And so, we hear an awful lot of alarm from a number of 
constituents who would be impacted by a decision that needs to 
be quick, but that shouldn't be hurried. And I think, as Mr. 
Tiberi pointed out, not all of the stakeholders are completely 
on board yet, but that is what the--this process should be 
about, so that we can get to the point where we address this in 
a timely fashion.
    The fundamental principle that we must all keep in mind is 
that these benefits that were earned by workers, and are 
counting on for their retirement security, is center and front. 
To me, this speaks to a broader conversation that we need to 
have about retirement security for all Americans.
    While I support defined benefit plans, as Ms. Oakley points 
out, there has been precipitous decline in the number of 
workers that have access to them. Even more concern is that, 
while many Americans now have access now to defined 
contribution plans, there are still millions that do not, or 
have chosen not to participate.
    Among those who do not choose to participate, they are not 
saving enough, as 72 percent of Americans participating in 
401(k) plans are not on track to reach their retirement income 
goal by age 65. That is why I further agree with Ms. Oakley 
that what we need to do is strengthen Social Security. And I am 
going to ask you to address that, because I know you didn't 
quite get to in your statement, what I read in your document, 
``To improve access to low-cost, high-quality retirement plans 
and improve the incentives for savings.''
    So, Ms. Oakley, I would like to focus specifically on the 
aspect of Social Security in terms of the overall retirement 
security of Americans. Given all of the evidence that 
retirement security of millions of Americans is increasingly in 
jeopardy due to the decline of defined benefit plans and the 
low rate of saving and defined contributions, wouldn't cuts to 
Social Security that have been proposed through measures like 
chained CPI be particularly devastating.
    And, as a follow-up, what do you think we can do to help 
strengthen Social Security benefits. And aren't there ways to 
make modest changes to make certain that the program is solvent 
long-term to bolster the obvious need that we hear before us 
today. Ms. Oakley.
    Ms. OAKLEY. Thank you, Mr. Larson, for that challenge.
    First of all, I think you are absolutely right. Social 
Security is the main source of retirement income. And as we 
look at the recent data just released by the Federal Reserve on 
the survey of consumer finances, and if you look at all working 
households, not just those households that have saved, when we 
look at people who are 10 years away from retirement, the 
median savings, that typical American, that woman in--outside 
of Dayton, that household today has just about $14,000 saved 
for retirement. And that is somebody who is between 55 and 64. 
If we look at all Americans between 65 and 25, it turns out 
that we actually lost ground from even just 3 years ago. The 
median savings is $2,500 in retirement accounts, be it an IRA, 
a 401(3)(b), 401(k) plan.
    So we know--and we also know, at the same time, that there 
is scheduled cuts already to come in Social Security. So, you 
are absolutely right, the people can't afford any more cuts. 
And I think, as we look at what can be done, you know, Social 
Security, as Mr. Gold said, you have got a choice of benefit 
cuts or finding a way to prefund some of those benefits with 
increases in the contributions.
    In survey, many surveys that have been done, including ones 
by my organization, there is strong public support for Social 
Security, because I think Americans know it is going to be a 
key part of their retirement, and they are willing to take a 
little bit more of a cost, either by having the cap raised, or 
by requiring greater contributions. And the sooner that is 
done, the quicker it happens.
    And, with regard to just broader savings, your state, for 
example, in Connecticut recently adopted legislation asking the 
state to look at is there a way that they can provide those 
employees in Connecticut who currently don't have savings 
something that is low cost, and will actually get them through 
retirement.
    So, I think there is a lot of new things going on that need 
some help out there, too.
    Mr. LARSON. Well, I thank you. I know our time is up. And 
because of the longevity comment, I was given just----
    Chairman TIBERI. I gave you an extra minute.
    Mr. LARSON. Just 30 seconds. Just 30 seconds----
    Chairman TIBERI. I will give you 30 seconds----
    Mr. LARSON. By way of----
    Chairman TIBERI. You are such a good sport.
    Mr. LARSON. By way of anecdote, and--which I again commend 
you and Mr. Neal for--these things are personal. And when you 
talk to people in a wealthy state, like Connecticut, and you 
find that women are subsisting on a total of $9,000 a year from 
Social Security only, you begin to deeply appreciate what they 
are up against, and why all these measures are interconnected, 
necessary, and we have to be quick. But we can't hurry.
    Chairman TIBERI. Thank you, Mr. Larson. That would be 
something like, I would think, Philosopher Pascrell would say. 
So----
    Mr. LARSON. He is the poet Laureate of----
    [Laughter.]
    Chairman TIBERI. Thank you so much. A leader in retirement 
issues, Mr. Paulsen from Minnesota.
    Mr. PAULSEN. Thank you, Mr. Chairman. You know, the irony 
is that I just learned my brother, who is an actuary, is 
actually in Connecticut, as we speak, at an industry 
roundtable, going through these same exact discussions, which 
is kind of interesting.
    But, Mr. Hall, I just want to dive into a question here a 
little bit--greater detail, what you just touched on, this 
longevity issue with mortality rates and the tables you deal 
with, because, you know, the reality is that the longer 
beneficiaries are expected to live, the larger the plan's 
future obligations are.
    So, if mortality is improving, you know, two-and-a-half 
years, and some of those numbers you mentioned, the plan-
sponsored pension liabilities are going to be increasing 
significantly. So do you expect plan sponsors, then, to 
consider a variety of changes to avoid the substantial cash 
contributions, irrespective of interest rates and rates of 
return, that will be required with this improvement in 
mortality?
    And, if so, what are some of the changes that plan sponsors 
would consider making to avoid that potentially significant 
increase? Because that kind of gets to the crux of the matter.
    Mr. HALL. Yes, the Society of Actuaries wouldn't have any 
specific guidance for plan sponsors. I think that we would 
encourage actuaries working with those plans to take the data 
that we have done through our mortality studies, combine it 
with specific plan information, and then work and encourage 
plan sponsors to come up with decisions that are best for their 
particular plan.
    Mr. PAULSEN. And maybe, Ms. Tully, you can kind of--but, 
you know, math, this is just numbers, this is arithmetic. I 
mean what are some of the options that you might have to look 
at, as an employer taking care of your employees, or Mr. 
Henderson, just to follow up on that.
    Ms. TULLY. Well, generally, I think that each company has 
to evaluate their specific circumstances from a plan design, 
demographic, and financial standpoint. And they do that on a 
continual basis, as do we. I am aware of the mortality studies 
that are out by the Society of Actuaries and, you know, there 
is no doubt that people are indeed living longer, as they 
indicated. But at this point we don't have any current plans to 
change our plans at this time.
    Mr. PAULSEN. Okay. Mr. Henderson.
    Mr. HENDERSON. Thank you, yes. The question about 
increasing contributions, obviously, Kroger is committed to 
making the contributions that we need to make. In fact, we 
contribute over $250 million a year to multi-employer plans. In 
effect, that is 10 percent of our pre-tax earnings. So 
contributions is not really the issue, it is the demographics 
inside these plans that are causing the problems.
    In fact, as much of the testimony here illustrates, for 
every dollar we contribute to multi-employer plan, a great 
percentage of that goes to fund orphan liabilities. So, 
justifying making voluntary contributions to plans is just very 
difficult for employers to do. And smaller employers, 
particularly, simply can't do it.
    Mr. PAULSEN. Good, all right. Thank you, Mr. Chairman. I 
yield back.
    Chairman TIBERI. Thank you, Mr. Paulsen. Mr. Marchant is 
recognized for 5 minutes.
    Mr. MARCHANT. Thanks for your testimony today. Following up 
on what you stated--this is for Mr. Henderson--can you speak 
more on the process of the National Coordinating Committee for 
Multi-Employer Plans, and what process they went through in 
defining their plan. And, in your opinion, did these 
recommendations from The NCCMP adequate address the issue if 
imminent insolvency?
    Mr. HENDERSON. I wasn't a member of the committee, I wish I 
had been.
    The NCCMP was a broad collection of participants and 
employer sponsors and unions and actuaries. And, Mr. Chairman, 
I am not an actuary, either. I am surrounded by them today, I 
have great respect for them. And, quite frankly, we won't solve 
these problems without their help. But the coalition that 
created the proposal is a broadly diversified group that 
includes both union and employer sponsors. In fact, we have 
written at least two letters jointly with the president of the 
United Food and Commercial Workers Union in support of those 
proposals.
    So, I think what it illustrates is that all the 
participants in these plans recognize how severe these problems 
are, and are proposing solutions that will help us.
    Mr. MARCHANT. Can you speak to the importance and effects 
of the reform and inaction, and what kind of effect it would 
have on Kroger's business model, especially on job creation and 
company growth.
    And then I would like for you to speak a little further on 
the orphan issue that you mentioned.
    Mr. HENDERSON. Well, I will take the orphan question first, 
actually. It is--in many of the plans in which I am familiar, 
the total liability of these plans, up to a third or even 40 
percent of that total liability has been created by the exit of 
previous employers. Some were--due to bankruptcy, were unable 
to pay any of their withdrawal liability.
    Some withdrew for other reasons, and either--because the 
rules may or may not require them to pay all of the liability 
that they owe, that leaves orphan liability--in fact, several 
years ago we did something extremely unique. We--working with 
The UFCW, we combined four multi-employer plans into one multi-
employer plan and achieved--there are a number of benefits 
associated with plan consolidation, which is a number of the 
proposals in the--to support plan consolidations and the 
benefits that you can enjoy.
    But when we consolidated the liabilities of those four 
plans, the combined liability of those plans was $3.5 billion, 
and approximately 1 billion of it came from orphan liabilities. 
That is liabilities for people who didn't even work for Kroger, 
much less work in the industry, itself. Now, again, we were 
able to--for the benefits we achieved, and working with UFCW, 
we were able to consolidate the plans and fully fund that plan 
today. So I clearly would support the proposals in The NCCMP 
proposal that support consolidating multi-employer plans.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    Chairman TIBERI. Ms. Schwartz is recognized for 5 minutes.
    Ms. SCHWARTZ. Thank you. I was nervous about the 
introduction, so thank you for being quite straight-forward 
about it, and no adjectives.
    So, appreciate the panel and the hearing today. Certainly 
is a serious issue before us. And I do think we need to put 
this in both the context of how difficult it is right now, 
given the potential insolvency, and--as well as the demographic 
shifts, and some of the rules for the multi-employer plans to 
work, and to be able to continue a defined benefit program for 
their employees. Obviously, that is what we are talking about.
    I think it was very helpful to have Ms. Oakley in front of 
all of us to realize how important this is to real Americans 
out there, who have planned very carefully, some of them, for 
exactly what they expect to get from their own personal 
savings, from employer benefits, how many of them define 
benefits, and from Social Security. And any one of those three 
getting messed up has huge implications for those families.
    I met a woman in my district who said she had figured very 
carefully about how to do this, but had not calculated that she 
would have to pay for cable, because nothing existed when she 
was planning it 20 years, to worry about that, or a cell phone 
or even a computer. And those were real costs that she had not 
counted on. So we haven't even discussed the fact that there 
are real--the realities for people out there, as well as the 
fact that we have just come through a very difficult recession. 
And the undermining of 401(k) plans has created tremendous 
uncertainty for Americans who have saved responsibly.
    Now, we all have a responsibility to help young people 
figure out how to save, and we have--there are suggestions, 
obviously, legislatively, about how we can encourage that.
    I don't think we want to change the demographic issues 
that--pointing out we don't--we are not likely--nor do we want 
to say that you should not live as long as you do, so we just 
have to accept the realities of that.
    So, I think what--my question for all of you--and I 
particularly appreciate some of the reality check Mr. Henderson 
has been providing. I have been to Kroger. If you shop at all 
in the southeastern part of the United States it is hard to 
miss, so I have been to your stores. And thank you for the 
level of responsibility you have taken in providing these 
defined benefit plans.
    So, just a couple questions, if I may, and I will start 
with Mr. Henderson, is you have referred to some actions we 
might take. But, given there is legislative proposals on the 
non-discrimination piece that Ms. Tully talked about, what else 
could Congress be doing to encourage potential responsible 
employers to take more responsibility in moving to prevent 
insolvency and, particularly in multi-employer plans, how do 
you make sure that the responsible employers are not left 
holding all the responsibility, which is happening. It is one 
question.
    And, two, given that you seem to be committed to, 
thankfully, a defined benefits plan, and all of the comments 
have been that we are moving away from that, what else could we 
be doing legislatively to encourage defined benefit plans, 
given that there is almost an assumption that they are going to 
go away, when, in fact, so many Americans are going to rely on 
that.
    So, those two questions, if I may.
    Mr. HENDERSON. All right, thank you for the question. We 
will soon have almost 400,000 employees in the company, and we 
sponsor DB plans, both internal to the company--a single 
employer plan--and the 36 multi-employer plans that we are in. 
My company sponsors a defined contribution plan, a 401(k) plan 
that has over $7 billion of employee and money matching 
contributions invested in it.
    I guess over--my experience tells me that, especially in DC 
plans, communication is critical with the participants. You--in 
a nutshell, you have to start early, you have to save, and you 
have to be diligent about that over your lifetime. And then, as 
your risk profile changes as you age, you need to be aware of 
that, and make the appropriate changes.
    So--but back to your first question about the other actions 
that we can take. Again, back to the NCCMP proposal, and other 
comments that have been made by folks at the PBGC themselves, 
we need--we could certainly use help in promoting plan 
consolidations. We could certainly use help in incentivizing 
plans, both single employer and multi-employer, to overfund 
those plans, if they can.
    When conditions are good and returns are good, if we could 
overfund those plans--in effect, save for a rainy day--the 
system as it is today really does not incentivize you. In fact, 
there is a disincentive to fund the plan to 100 percent. And I 
think, if we change the rules and incentivize plans to overfund 
their plans when they are good--and, again, I--you know, Mr. 
Gold's testimony is the situation is bleak on multi-employer 
plans, as I testified. And, if you listen to Mr. Gold, it is 
actually even worse.
    So, I do think anything we can do to promote changes in the 
system, to consolidate plans, incentivize contributions to 
plans, keep the liabilities inside the plans, because, frankly, 
based on the expert's testimony, the PBGC will not be there to 
support those benefits.
    Ms. SCHWARTZ. It is a very fair warning, given that we have 
had our own actions, and ones that many of us have questions 
about, the whole issue of smoothing--these are not particularly 
good ideas when we are looking at what happens in 10, 20 years. 
When we can, we should be making those investments. So thank 
you for your comments.
    Chairman TIBERI. Thank you, Ms. Schwartz. Mr. Schock is 
recognized for 5 minutes.
    Mr. SCHOCK. Thank you, Mr. Chairman. Thank you, first, Mr. 
Chairman, for holding this hearing. I think it is a very 
important topic, and I know you and I have worked together on 
some of your past legislative proposals, some more welcome and 
controversial than others.
    First I would like to ask Mr. Henderson. Obviously, we are 
aware that there is a problem here. To put you up here on the 
dais, I would suggest to you that for us to be able to do much 
of what you are proposing and others requires not only the 
political will of Members of Congress, but also the desire of 
our constituents. And, as a frequent shopper of Kroger myself, 
I will tell you that I have not had a bagger or a cashier or 
someone in the bakery department talk to me about this issue.
    So, my challenge to you would be what is your organization 
doing to inform, educate, and motivate the thousands of 
employees that you have that are voting constituents of our 
districts to, first, make them aware that there is a problem 
with their pension, and, second, to motivate them that if, in 
fact, nothing is done, as suggested, in a decade, it goes belly 
up, and their benefits are in question.
    Because that is really, I think--you know, there is 
different levers that we can tweak, you have done a great job 
in outlining them. But help assure me that you are going to go 
back here today, not only leaving us with a list of things to 
do, but also a willingness and a desire to go back and help 
fire up the troops and educate the very constituents that we 
are all here today talking about trying to help.
    Mr. HENDERSON. Thank you, Congressman, and I am, frankly, 
glad to say that the majority of Kroger's--the plans in which 
we participate, in fact, are what I would describe as certainly 
better funded, if not well funded.
    In fact, if you look at our annual report, the disclosures 
which are now required by the accounting profession require us 
to disclose certain pieces of information about the significant 
plans in which we participate. In our annual report there are 
approximately 12 large plans in which we participate. Seven of 
those plans are described by the PPA as being ``red zone'' 
plans, and they have qualified rehabilitation plans in place. 
And for all but two of those plans, the funded status of that 
plan, the way we measure it today, is over 80 percent and 
improving.
    My point is that the provisions of the Pension Protection 
Act--speaking, again, as an employer trustee who has had to 
make these kinds of decisions--the provisions of the Pension 
Protection Act are working and have improved the funded status 
of multi-employer plans, certainly within the group that Kroger 
participates in.
    The example that I have to go back to, however, is Central 
States. Based on all of the projections, the demographics just 
simply overwhelm the finance in that condition.
    Mr. SCHOCK. Do the Central States employees understand 
their plan is underfunded----
    Mr. HENDERSON. You know, I am not sure that they do, 
because the communication--it gets confusing. It is a highly 
complicated subject.
    Quite frankly, you know, we are kicking around numbers 
here, billions of this and billions of that, as if it is more 
or less Monopoly money. I try to put a more human face on this. 
There is someone my age who has been driving, you know, a truck 
for Kroger for decades safely and on time. And he is probably 
getting ready to retire, and he is looking at a retirement 
benefit out of the Central States plan of maybe--well, the 
average--and with respect to the actuaries on the panel----
    Mr. SCHOCK. I am sorry, I am running out of time.
    Mr. HENDERSON. Okay.
    Mr. SCHOCK. The point is they need to know that it is 
underfunded. They need to know there is a problem. And we don't 
need to talk to them out in billions, we need to talk to them 
about their several thousand dollars a month they are thinking 
they are going to get isn't going to be there, because it makes 
it easier for us to then help you----
    Mr. HENDERSON. But the rules----
    Mr. SCHOCK [continuing]. Accomplish what we are trying to 
do.
    Mr. HENDERSON. Yes, sir. With the rules in place today, 
their benefit----
    Mr. SCHOCK. The other question I want to ask you, Mr. 
Henderson, and also Mr. Gold, perhaps, is these red zone plans 
that have been identified as basically--their liability being 
so great that if we actually made them pay in what they needed 
to pay into the multi-employer pension plans, they would fold, 
we say, ``Well, gee, for the sake of keeping you in, we won't 
charge you.'' But, in fact, that only makes the problem worse.
    So, I guess, as a member of the multi-employer pension 
plan, Mr. Gold, who studies this, I am just curious, what are 
we to do----
    Mr. HENDERSON. You want to go first----
    Mr. SCHOCK. Are we doing the right thing, allowing for red 
zone plans to basically get a freebie for the time being, but 
yet not fixing the unfunded liability that their employees have 
created? Or is there some other path that we should be looking 
at to help keep them in the multi-employer pension plan, but 
also not exacerbate the unfunded liability----
    Mr. GOLD. Well, I don't have any magic to offer. It is--the 
one way to describe the way we are treating them today, it is 
palliative care. And that may be as much as we can do for those 
really, really troubled plans, which I think is the subject of 
your question. Much of my focus is on the healthier plans, and 
how to keep them healthy over an extended period--for 
generations, perhaps--and that is why I focus on the 
understatement.
    I agree with Mr. Henderson that the--for these terribly 
troubled plans, the demographics overweigh the financial 
issues. And it is the financial issues for the healthier plans 
which also trouble me.
    Mr. HENDERSON. Okay. And, first, I am reminded that, based 
on the funded status of the Central States plan, we--the plan 
is required on an annual basis to send a funding notice, if you 
will, to all participants of the plan about the condition of 
the plan. And so all of the members of the Central States 
plan--participants should have received a letter describing the 
status of that plan to them.
    Mr. SCHOCK. Great. Thank you both, I appreciate it.
    Chairman TIBERI. Thank you. The gentleman from Indiana, Mr. 
Young, is recognized.
    Mr. YOUNG. Thank you, Mr. Chairman. I thank all our 
panelists here today. I just would like to begin by first 
acknowledging the concerted and affirmative efforts of Kroger--
and I know Raytheon, because I visited your facilities--to hire 
veterans. I think that is very important during this period of 
time.
    I am really pleased that the chairman has convened this 
hearing to discuss the integrity of private defined pension 
benefit plans. There is no doubt, based on some of the grim 
assessment that we have heard here today, that--and especially 
as it pertains to retirement savings more generally--that we 
need to act, and act boldly here in Congress.
    I know there is one affirmative step that this Committee 
can take that will help improve that situation for hundreds of 
thousands of American workers. And this is a bit of a departure 
from what we have been talking about, but it bears mentioning, 
I think. I would hope we work together in coming months, and 
perhaps beyond, to support and protect from adverse DOL 
regulations ESOPs. This business formation results in employee-
owner saving for a secure retirement by owning a piece of where 
they work.
    Ms. Tully, back to the primary focus of this hearing--I 
appreciate your testimony today--and specifically your focus on 
non-discrimination rules, there is obviously a well-intentioned 
rationale behind the existence of these rules, and so forth. 
But our workforce has changed and will continue to change, and 
we clearly need to step back and analyze those rules anew.
    With that in mind, I applaud Chairman Tiberi and Ranking 
Member Neal for their work together on this issue, and I hope 
the full committee at some point can fully consider H.R. 5381. 
We have to get this right, bottom line, for the benefit of both 
the companies and the beneficiary.
    Ms. Tully, during your testimony you spoke to some length 
about the impact the non-discrimination rules have on 
employers, and also that the IRS granted certain non-
discrimination relief through 2015. With that in mind, can you 
discuss a bit about how Raytheon currently operates their 
benefit plan in order to comply with the non-discrimination 
rule structure, and how that would change after the IRS relief 
expires----
    Ms. TULLY. Sure, thank you. So our plans currently pass all 
of the testing requirements under the non-discrimination rules, 
and we do not actually need to utilize the testing relief at 
this point that the Treasury has offered. And if we were to run 
into testing issues, we would evaluate our situation then, and 
determine what our next steps would be with respect to our 
plan.
    Mr. YOUNG. Mr. Henderson--you have thoughts on that 
question----
    Mr. HENDERSON. Well, at Kroger, on the single-level 
employer plan we face the same issue with respect to the non-
discrimination testing, and we support what the young lady from 
Raytheon is proposing, as well.
    Mr. YOUNG. Thank you. Ms. Tully, in reference to other 
proposals that might help mitigate or, ideally, eliminate this 
current problem, what if we changed the definition of highly 
compensated employees--or are there other solutions that might 
work outside those proposed by my good colleagues Messrs. 
Tiberi and Neal----
    Ms. TULLY. Yes. So one potential short-term option could be 
to change the definition, as you mentioned, of highly-
compensated employees, or make some other fixes, I would say, 
around the edges of these rules. But any change such as that 
would be a temporary solution, and wouldn't actually fix the 
long-term problem.
    And also, because of the nature of these complex actuarial 
ratio tests that are used in the rules, there is actually a 
chance that changing some of these provisions, such as the 
definition of ``highly compensated employees'' could cause some 
employees--employers to actually fail the test with such a 
change.
    In terms of other possible solutions, there could be other 
possible solutions. I believe our perspective is that those 
solutions need to be focused on the long-term fix for 
employers, versus the short-term sort of Band-Aid solutions to 
this issue. And you know, one possible additional long-term fix 
may be to simply apply a general grandfathering rule that would 
allow for employers who had passed all of these testing 
provisions at the time that they were open, or at the point at 
which they were closed, to continue to be considered passing in 
the future. So that is just another possible solution.
    Mr. YOUNG. Thank you for sharing your perspective. I yield 
back. Thank you.
    Chairman TIBERI. Thank you. Mr. Kelly, welcome to the 
subcommittee. You are recognized for 5 minutes.
    Mr. KELLY. Thank you, Chairman, and I appreciate it, and 
thank you all for showing up.
    My concern, because I come from the private sector, is the 
private sector. And when you look at ERISA, their concerns are 
only with private-sector pension plans. Is that correct? So if 
there is the public sector--so if you were to say, well, the 
Federal, the state and local governments, churches, none of 
those are covered by this--and one of the problems--is that a 
wrong statement, Mr. Gold----
    Mr. GOLD. The central provisions of ERISA apply almost 
exclusively to the private sector, as you say.
    Mr. KELLY. Okay.
    Mr. GOLD. There are some church plan rules and some other 
things. That is why you saw the look on my face.
    Mr. KELLY. No, that is okay, because I am really concerned 
about this, because it seems to me it is kind of a two-sided 
coin, or a one-sided coin.
    Let me just ask you this, because I have a great deal of--
number of small employers in my district. I am going to read 
this to you, because I think it is important to get this point 
across. I have a company, Channellock, who--they make very 
high-precision tools, tools that almost every tech in the world 
uses. They have been in business since 1886. Mr. Diamond 
questions me about this all the time. Let me ask you this.
    Private sponsor of traditional pension plans must fund 
their plans using an average, high-quality corporate bond rate, 
as modified as MAP-21, and they must also pay PBGC premiums to 
cover other employers who defaulted on their plans. These rules 
have caused almost every private employer to discontinue 
providing pension benefits.
    In addition, the expense of these plans has increased 
dramatically. Low interest rate environment and high PBGC 
premiums, so job creation of our best employers has been 
hampered in recent years now.
    There is little incentive for an employer to overfund their 
plans, due to significant excise tax on the return of excess 
funds in the plan when a plan is terminated. And, in addition 
to paying taxes on the reversion of excess funds, which is 
reasonable, there is a 20 percent excise tax, at best, and it 
could be as high as 50 percent.
    For example, Channellock's pension plan. By government 
standards, which generally uses a long-term rate expected on 
trust fund assets of 7\1/2\ percent, is 100 percent funded. 
However, by private industry standards, they are significantly 
underfunded. Annual funding requirements are about $1 million 
per year. PBGC premiums are currently around 200,000, and are 
scheduled to increase to around $450,000 in the next two years.
    Now, these are some solutions that they are offering. 
Eliminate the excise tax and reversions of plan assets from 
pension plans. Without concerns of high penalties from 
overfunding, employers will be more likely to prefund their 
plans, knowing that they can recover the excess in the future 
without huge penalties, or change the funding requirements of 
The PBGC premiums to be computed using a long--using a 
reasonable long-term rate of return expected on a trust fund. 
So, for example, it would be seven percent.
    The reason I bring it up--Every one of these things that we 
just talked about is a cost of doing business for them, and it 
adds to their burden of doing what it is that they do. And it 
just doesn't make sense to me that we put so much weight on the 
private sector and yet, on the public sector, if they are 
underfunded, the responsibility falls back on the taxpayers to 
make them whole.
    Yet, in the private sector, we put this burden on them, the 
exact people we need to lift us out of this malaise that we are 
in right now. We are making it harder for them to do business, 
and we penalize them for salting away money in the good years 
so they can cover the bad years. And it doesn't make sense to 
me. And I have people ask me all the time, they say, ``Well, I 
don't understand how some companies, who made huge profits last 
year, are paying no taxes, and yet I am paying taxes every 
year.'' And I said, ``It is very simple; it is part of our Tax 
Code. You have carry-forward losses.''
    Do you have an opinion on any of these things, The PBGC 
specifically--Are those premiums excessive, and are those 
putting such a burden on our private-sector people that they 
are deciding to walk away from what they thought was an 
excellent benefit for the people that work with them----
    This is a company that was founded in 1886, they are strong 
employers, they are strong members of the community, and yet 
those are the people that we always put the heaviest burden on. 
And I got to tell you, at some point, it is the old story, 
``Don't worry about the mule, just load the wagon.'' I think 
the mule is ready to unhitch himself and walk away from this 
burden.
    Yes, you can--please, you said something and I thought it 
was great: Good policies cannot be based on bad numbers. And I 
think, if you start with bad numbers, you are going to end up 
with bad policy.
    Mr. GOLD. Well, I may not give you that much satisfaction, 
because----
    Mr. KELLY. I am not looking for satisfaction, I am looking 
for fairness.
    Mr. GOLD. First, I am not a fan of those excise taxes. They 
began with Senator Metzenbaum in the eighties, and they were 
solving a problem we no longer have today.
    But the cost of defined benefit pension plans, particularly 
in a low-interest-rate environment, is higher, by far, than it 
was in the 1980s or at any time when interest rates were 
higher. That is just the laws of finance.
    But I am always troubled by the thought that we are in some 
way, by demanding contributions to pension plans, either 
injuring the economy or injuring job prospects, and here is the 
reason. That money does not go down a rat hole. The money 
contributed goes right into the capital markets, where it then 
becomes available for new investments. And the secret of the 
capital markets is they try to deliver that money to those 
companies with the best forward-looking prospects. And that 
means that, while individual companies may be strapped for 
pension costs, and perhaps considering lightening their 
workforce, the economy, as a whole, is actually stimulated by 
the collection of pension contributions, which are tax 
deductible, which lowers taxes and, therefore, is also 
stimulative.
    So, I do not find--I understand for individual companies 
that pension contributions can be burdensome, but in the 
aggregate I don't find that to be true.
    Mr. KELLY. Well, I agree, in the aggregate, I understand. 
And a lot of the projects we see are being funded now by 
pension funds. I talked to people who do those projects, and 
they really go to the pensions to find that money to be 
invested. But if you are Channellock, and you are facing this, 
it drives the cost of your finished product--I think there is a 
disconnection between the private sector and the public sector. 
They believe--``they,'' believe the public sector--that it 
doesn't matter what your costs are, just add it on to the 
purchase price. I got to tell you, when people have a choice, 
price point is very important.
    So, if it costs you more to make a product and to put it on 
the shelf, and you have to charge more for it, there is--
chances are you won't sell as many. If you don't sell as many, 
you don't need to make as many. If you don't need to make as 
many, you don't need to employ as many. I think we put a heck 
of a burden on the private sector and walked away from it. 
Because, in the public sector, the taxpayers will eventually 
make up the difference between what is underfunded and not, and 
it just doesn't work that way.
    Mr. Hall, I appreciate your talk when you talk about 
mortality. I mean the longer we live, the greater access we 
have to these funds, and it does create a problem down the 
road. I want to live as long as I can. But, by the same token, 
I know that at some point we run out of the ability to fund all 
those things.
    So, thank you all for being here. But it is a great 
concern, especially in the private sector. And it, to me, comes 
down to sustainability. Can we sustain these programs--And 
often times our hearts are willing, but our wallets are weak, 
and I think we are running out of time on this.
    Thank you, Mr. Chairman.
    Chairman TIBERI. Great way to close. Thank you, Mr. Kelly. 
Great hearing, great testimony, great questions.
    This concludes today's hearing. Please be advised that 
Members may submit written questions to the witnesses. Those 
questions and the witnesses' answers will be made part of the 
record. I would like to thank all of you for appearing today, 
for your time. It has been super educational, and it also 
demonstrates, again, the challenges that both single-employer 
and multi-employer plans and pension plans face.
    That is it for today. This hearing is adjourned.
    [Whereupon, at 11:40 a.m., the subcommittee was adjourned.]
    [Submissions for the Record follow:]

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