[House Hearing, 114 Congress] [From the U.S. Government Publishing Office] EXAMINING REFORMS TO MODERNIZE THE MULTIEMPLOYER PENSION SYSTEM ======================================================================= HEARING before the SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS COMMITTEE ON EDUCATION AND THE WORKFORCE U.S. House of Representatives ONE HUNDRED FOURTEENTH CONGRESS FIRST SESSION __________ HEARING HELD IN WASHINGTON, DC, April 29, 2015 __________ Serial No. 114-12 __________ Printed for the use of the Committee on Education and the Workforce [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Available via the World Wide Web: www.gpo.gov/fdsys/browse/ committee.action?chamber=house&committee=education or Committee address: http://edworkforce.house.gov _________ U.S. GOVERNMENT PUBLISHING OFFICE 94-314 PDF WASHINGTON : 2016 ____________________________________________________________________ For sale by the Superintendent of Documents, U.S. Government Publishing Office, Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800 Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001 COMMITTEE ON EDUCATION AND THE WORKFORCE JOHN KLINE, Minnesota, Chairman Joe Wilson, South Carolina Robert C. ``Bobby'' Scott, Virginia Foxx, North Carolina Virginia Duncan Hunter, California Ranking Member David P. Roe, Tennessee Ruben Hinojosa, Texas Glenn Thompson, Pennsylvania Susan A. Davis, California Tim Walberg, Michigan Raul M. Grijalva, Arizona Matt Salmon, Arizona Joe Courtney, Connecticut Brett Guthrie, Kentucky Marcia L. Fudge, Ohio Todd Rokita, Indiana Jared Polis, Colorado Lou Barletta, Pennsylvania Gregorio Kilili Camacho Sablan, Joseph J. Heck, Nevada Northern Mariana Islands Luke Messer, Indiana Frederica S. Wilson, Florida Bradley Byrne, Alabama Suzanne Bonamici, Oregon David Brat, Virginia Mark Pocan, Wisconsin Buddy Carter, Georgia Mark Takano, California Michael D. Bishop, Michigan Hakeem S. Jeffries, New York Glenn Grothman, Wisconsin Katherine M. Clark, Massachusetts Steve Russell, Oklahoma Alma S. Adams, North Carolina Carlos Curbelo, Florida Mark DeSaulnier, California Elise Stefanik, New York Rick Allen, Georgia Juliane Sullivan, Staff Director Denise Forte, Minority Staff Director ------ SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS DAVID P. ROE, Tennessee, Chairman Joe Wilson, South Carolina Jared Polis, Colorado, Virginia Foxx, North Carolina Ranking Member Tim Walberg, Michigan Joe Courtney, Connecticut Matt Salmon, Arizona Mark Pocan, Wisconsin Brett Guthrie, Kentucky Ruben Hinojosa, Texas Lou Barletta, Pennsylvania Gregorio Kilili Camacho Sablan, Joseph J. Heck, Nevada Northern Mariana Islands Luke Messer, Indiana Frederica S. Wilson, Florida Bradley Byrne, Alabama Suzanne Bonamici, Oregon Buddy Carter, Georgia Mark Takano, California Glenn Grothman, Wisconsin Hakeem S. Jeffries, New York Rick Allen, Georgia C O N T E N T S ---------- Page Hearing held on April 29, 2015................................... 1 Statement of Members: Roe, Hon. David P., Chairman, Subcommittee on Health, Employment, Labor, and Pensions............................ 1 Prepared statement of.................................... 3 Polis, Hon. Jared, Ranking Member, Subcommittee on Health, Employment, Labor, and Pensions............................ 3 Prepared statement of.................................... 13 Statement of Witnesses: DeFrehn, Mr. Randy G., Executive Director, National Coordinating Committee for Multiemployer Plans, Washington, DC......................................................... 15 Prepared statement of.................................... 18 McManus, Mr. Mark, General Secretary-Treasurer, United Association, Annapolis, MD................................. 29 Prepared statement of.................................... 32 Sandherr, Mr. Steve, Chief Executive Officer, Associated General Contractors of America, Arlington, VA.............. 35 Prepared statement of.................................... 37 Scoggin, Mr. Andrew, Executive Vice President, Human Resources, Labor Relations, Public Relations and Government Affairs, Albertsons, LLC, Boise, ID........................ 24 Prepared statement of.................................... 26 Additional Submissions: Mr. Polis: Prepared statement of the National Electrical Contractors Association............................................ 6 Dr. Roe: Prepared statement of the U.S. Chamber of Commerce....... 50 Prepared statement of the National Automobile Dealers of America................................................ 54 EXAMINING REFORMS TO MODERNIZE THE MULTIEMPLOYER PENSION SYSTEM ---------- Wednesday, April 29, 2015 House of Representatives, Subcommittee on Health, Employment, Labor, and Pensions, Committee on Education and the Workforce, Washington, D.C. ---------- The subcommittee met, pursuant to call, at 2:34 p.m., in room 2175, Rayburn House Office Building, Hon. David P. Roe [chairman of the subcommittee] presiding. Present: Representatives Roe, Walberg, Carter, Grothman, Allen, Polis, Pocan, Wilson of Florida. Also present: Scott. Staff present: Andrew Banducci, Professional Staff Member; Janelle Belland, Coalitions and Members Services Coordinator; Ed Gilroy, Director of Workforce Policy; Callie Harman, Staff Assistant; Nancy Locke, Chief Clerk; Zachary McHenry, Legislative Assistant; Daniel Murner, Deputy Press Secretary; Michelle Neblett, Professional Staff Member; Brian Newell, Communications Director; Krisann Pearce, General Counsel; Lauren Reddington, Deputy Press Secretary; Alissa Strawcutter, Deputy Clerk; Juliane Sullivan, Staff Director; Loren Sweatt, Senior Policy Advisor; Alexa Turner, Legislative Assistant; Tylease Alli, Minority Clerk/Intern and Fellow Coordinator; Austin Barbera, Minority Staff Assistant; Denise Forte, Minority Staff Director; Carolyn Hughes, Minority Senior Labor Policy Advisor; Kendra Isaacson, Minority Labor Detailee; Brian Kennedy, Minority General Counsel; Veronique Pluviose, Minority Civil Rights Counsel. Chairman Roe. Quorum being present, the Subcommittee on Health, Employment, Labor, and Pensions will come to order. Good afternoon. I would like to begin by extending a warm welcome to our witnesses and guests who have joined us this afternoon. Today's hearing represents the next step in a long process to strengthen the retirement security of America's workers by reforming the multiemployer pension system. This effort began more than three years ago for a simple reason: a pension crisis threatened the well-being of countless workers, employers, and retirees as well as American taxpayers. Without congressional action, this crisis would have forced businesses to close their doors and lay off workers, retirees would have had their benefits cut, if not wiped out entirely, and taxpayers would have been on the hook for a multi-billion-dollar bailout of a bankrupt pension system. As a nation and, more specifically, as elected policymakers we had a responsibility to act. That is why this subcommittee convened numerous hearings and called more than a dozen witnesses--including employers, union leaders, administration officials and retiree advocates-- in order to thoroughly examine the challenges facing this system and discuss possible solutions. As part of this effort, in the Spring of 2014, Chairman Kline discussed four key principles necessary for any serious, responsible reform of the system. Those principles included protecting taxpayers, encouraging greater employer participation, and providing trustees new tools to restore troubled plans back to financial health. At the time of the chairman's remarks, only one proposal embodied all four principles, and that was the proposal crafted by the National Coordinating Committee for Multiemployer Plans, or the NCCMP. A coalition of management and labor representatives organized by the NCCMP spent months crafting a consensus proposal that would give trustees the best shot they had to save dying pension plans without a taxpayer bailout. No one else came forward with a credible plan to responsibly reform the system. The NCCMP proposal became the framework for a bipartisan legislative solution the President signed into law last December. This new law extended funding rules put in place almost a decade ago, raised premiums to improve the financial outlook of the federal backstop for the multiemployer pension plans at the PBGC and allowed trustees to adjust benefits as a last resort to rescue a plan from insolvency. This was not an easy thing to do, but doing nothing would have been far worse. Regardless of whether we did or didn't act, retirees in badly failing plans were going to have their benefits cut. That is the harsh reality we were forced to confront, and the choice we faced was either to watch the federal government inflict maximum pain on the maximum number of individuals or provide flexibility to save these plans and ensure retirees are better off. George Miller, the former congressman from California and senior Democrat on our committee, described these bipartisan reforms this way, ``The approach we have put forward, which is backed by business and labor leaders, will secure the multiemployer pension system for millions of current and future retirees' inputs.'' Congressman Miller urged his colleagues to, ``trust these workers enough to give them this opportunity and this responsibility to make these decisions about their own retirement.'' That is precisely what we did, and as difficult as it was, it was the right thing to do. Now it is time to complete this important effort. One principle I neglected to mention earlier in the subject of today's hearing--Modernizing the Multiemployer Pension System--through our continued oversight. It has become abundantly clear that workers need new options to help plan for their retirement. As part of its work, NCCMP devised a new ``composite pension plan design,'' combining aspects of both the defined benefit and defined contribution plans. The goal of the proposal is to deliver an annuitized lifetime income without the drawbacks associated with traditional multiemployer defined benefit plans. For example, many plans face unfunded liabilities that threaten the retirement security of other participants. The current rules discourage employers from agreeing to participate in this system, and pose a financial burden for those who do. Finally, despite improvements resulting from the new law, the federal backstop for these plans continues to face fiscal challenges in meeting its modest benefit guarantees. Our witnesses today will describe these and other shortcomings. They will also explain how the composite plan design could address these concerns, while providing robust, well-funded retirement benefits for America's working families. I look forward to our discussion and, more importantly, to finishing this important effort. It is easy to find the areas of disagreement in this subcommittee, especially when we address policies so central to the well-being of the American people. But I have always appreciated the bipartisan approach the committee has taken on this important issue, and I pledge to do my part to continue that tradition in the work that lies ahead of us. And with that, I will now yield to Ranking Member Polis for his opening remarks. [The statement of Chairman Roe follows:] Prepared Statement of Hon. David P. Roe, Chairman, Subcommittee on Health, Employment, Labor, and Pensions Good afternoon. I'd like to begin by extending a warm welcome to our witnesses and guests who have joined us this afternoon. Today's hearing represents the next step in a long process to strengthen the retirement security of America's workers by reforming the multiemployer pension system. This effort began more than three years ago for a simple reason: A pension crisis threatened the well- being of countless workers, employers, and retirees, as well as American taxpayers. Without congressional action, this crisis would have forced businesses to close their doors and lay off workers, retirees would have had their benefits cut, if not wiped out entirely, and taxpayers would have been on the hook for a multi-billion dollar bailout of a bankrupt pension system. As a nation, and more specifically, as elected policymakers, we had a responsibility to act. That is why this subcommittee convened numerous hearings and called more than a dozen witnesses - including employers, union leaders, administration officials, and retiree advocates - in order to thoroughly examine the challenges facing the system and discuss possible solutions. As part of this effort, in the spring of 2014, Chairman Kline discussed four key principles necessary for any serious, responsible reform of the system. Those principles included protecting taxpayers, encouraging greater employer participation, and providing trustees new tools to restore troubled plans back to financial health. At the time of the chairman's remarks, only one proposal embodied all four principles, and that was the proposal crafted by the National Coordinating Committee for Multiemployer Plans or NCCMP. A coalition of management and labor representatives organized by NCCMP spent months crafting a consensus proposal that would give trustees the best shot they had to save dying pension plans without a taxpayer bailout. No one else came forward with a credible plan to responsibly reform the system. The NCCMP proposal became the framework for a bipartisan legislative solution the president signed into law last December. This new law extended funding rules put in place almost a decade ago, raised premiums to improve the financial outlook of the federal backstop for multiemployer pension plans, and allowed trustees to adjust benefits as a last resort to rescue a plan from insolvency. This was not an easy thing to do, but doing nothing would have been far worse. Regardless of whether we did or didn't act, retirees in badly failing plans were going to have their benefits cut. That's the harsh reality we were forced to confront, and the choice we faced was to either watch the federal government inflict maximum pain on the maximum number of individuals, or provide more flexibility to save these plans and ensure retirees are better off. George Miller, former congressman from California and senior Democrat of our committee, described these bipartisan reforms this way: ``The approach we have put forward, which is backed by business and labor leaders, will secure the multiemployer pension systems for millions of current and future retirees.'' Congressman Miller urged his colleagues to ``trust these workers enough to give them this opportunity and this responsibility to make these decisions about their retirement.'' That is precisely what we did, and as difficult as it was, it was the right thing to do. Now, it is time to complete this important effort. One principle I neglected to mention earlier in is the subject of today's hearing: Modernizing the multiemployer pension system. Through our continued oversight, it has become abundantly clear that workers need new options to help plan for their retirement. As part of its work, NCCMP devised a new ``composite'' pension plan design, combining aspects of both defined benefit and defined contribution plans. The goal of the proposal was to deliver annuitized, lifetime income without the drawbacks associated with traditional multiemployer defined benefit plans. For example, many plans face unfunded liabilities that threaten the retirement security of their participants. Current rules discourages employers from agreeing to participate in the system and poses a financial burden for those who do. Finally, despite improvements resulting from the new law, the federal backstop for these plans continues to face fiscal challenges in meeting its modest benefit guarantees. Our witnesses today will describe these and other shortcomings. They will also explain how the composite plan design could address these concerns while providing robust, well-funded retirement benefits for America's working families. I look forward to our discussion, and more importantly, to finishing this important effort. It is easy to find areas of disagreement on this subcommittee, especially as we address policies so central to the well-being of the American people. But I have always appreciated the bipartisan approach the committee has taken on this important issue, and I pledge to do my part to continue that tradition in the work that lies ahead. ______ Mr. Polis. Thank you. And I want to thank Chairman Roe for his effort in working in a bipartisan way to arrange this hearing and begin the important discussions that our committee and our Congress need to undertake to address what some of us call phase two of multiemployer pension reform--new plan designs. I want to acknowledge that there were several individuals in the audience from the Colorado Association of Mechanical and Plumbing Contractors, who are in full support of the work we are doing. I think some of them might have had to leave to take a flight, but I did want to acknowledge that they came out here to watch the good bipartisan work of this committee. Last year, as the chairman acknowledged, some hard decisions were made to ensure the multiemployer pension system will exist for years to come. But our work isn't done because we have not fully fixed our system. And establishing a strong and sustainable pension system needs to be our goal as we figure out details here in phase two. I believe phase two must encourage innovative new plans that would allow for some flexibility for employees and employers, while also providing adequate protection for our workers. It needs to be our goal to ensure that hardworking Americans are able to retire with the dignity and respect that they deserve. Securing lifetime incomes for retirees is an important feature of each of the plan designs that we are going to be hearing about here today. As people live longer, they generally need more money than they might have expected, and one way to address the situation is through a lifetime income stream that would ensure that an individual does not outlive his or her assets. The sources of retirement income were once compared to a three-legged stool, with Social Security, your employer's retirement plan, and personal savings each establishing a leg of the stool. The strength of each leg of the stool may change, but it could be reinforced with one of the other two. We know that Americans on average are not saving enough, so retirees are relying more heavily on Social Security and their employer's retirement plans. While Social Security provides lifetime income, it is only designed to provide a minimum level of support. Today, we are looking at options to strengthen the third leg of the stool, employer's retirement plans. While we explore new options, we need to be sure that any existing plans, which we would call ``legacy plans,'' once a new plan is adopted, are preserved in such a way so that all workers and retirees covered under that plan are also protected. We also know that the current system isn't working for everybody, and doing nothing and allowing some of these plans to go bankrupt would only hurt our seniors and retirees and is simply unacceptable. We need to create a space where smart, innovative and flexible ideas can come to fruition. And the NCCMP's ``Solutions, Not Bailouts'' recommendations, are a great place to start. And for those of you who haven't had a chance to read it, I encourage you to do so. The recommendations were put together with input from a wide variety if organizations and stakeholders. And I would like to submit for the record a statement from one of those groups, the National Electrical Contractors Association. Chairman Roe. Without objection, so ordered. [The information follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Polis. As I see it, we have several different ideas to discuss today, including variable annuity plans and target benefit plans and composite plans. Whatever route we decide to take must allow workers and employers to negotiate a plan and benefit so it would allow the economy to expand, keep companies competitive, allow employers to grow, while giving those that have worked their lives at a good job the ability to enjoy retirement with their loved ones without the threat of that security being taken away. Our seniors shouldn't have to choose between heating their homes or putting food on the table. As always, the devil will be in the details: the specifics of these plans. I am interesting in learning from our great panel of experts about the recommendations for alternative plan designs and their advice for avoiding pitfalls. This is a great bipartisan way to start the conversation and fact-finding mission. I believe we have the same goal. I look forward to finding a shared bipartisan path forward on legislation, just as we are in this hearing today. I yield back the balance of my time. [The statement of Mr. Polis follows:] Prepared Statement of Hon. Jared Polis, Ranking Member, Subcommittee on Health, Employment, Labor, and Pensions Thank you. I first want to thank Chairman Roe for his effort in working in a bipartisan way to arrange this hearing, and to begin the important discussion to address what we can call ``phase two'' of multiemployer pension reform- New Plan Designs. I also want to acknowledge several individuals in the audience from the Colorado Association of Mechanical and Plumbing Contractors who are in full support of the work we are doing. Last year some hard decisions were made to ensure the multiemployer pension system will exist for years to come. Our work is not done yet, because we have not fully fixed our shaky system, and establishing a strong and sustainable pension system must be our goal as we figure out the details for this phase two. I believe phase two must encourage innovative new plans that would allow for some flexibility for employers, while also providing adequate protection for our workers. It must be our goal to ensure hardworking Americans are able to retire with the dignity and respect they deserve. Securing lifetime income for retirees is an important feature of each of the plan designs we are discussing today. As people live longer, they generally need more money than they expect and one way to address this situation is through a lifetime income stream that would insure an individual does not outlive his or her assets. The sources of retirement income were once compared to a three- legged stool: with Social Security, your employer's retirement plan, and personal savings establishing each leg of the stool. The strength of each leg of the stool may change, but it could be reinforced with one of the other two. We know that Americans on average are not saving enough, so retirees are relying more heavily on Social Security and their employer's retirement plans. While Social Security provides lifetime income, it is only designed to provide a minimum level of support. Today, we are looking at options to strengthen that third leg of the stool - employer's retirement plans. While we explore new options, we must be sure that any existing plans (which would be called legacy plans once a new plan is adopted) are preserved in such a way so that all workers and retirees covered under that plan are protected. We also know that the current system is not working for everyone. And doing nothing, and allowing some of these plans to go bankrupt, which does nothing to help our seniors and retirees, is not acceptable. Instead we must create a space where smart, innovative and flexible ideas can come to fruition. This should be our goal. The NCCMP's Solutions, Not Bailouts recommendations are a great place to start, and for those of you who haven't read it, I encourage you to do so. These recommendations were made with input from all types of organizations and groups, and I would like to submit for the record a statement from one of those groups- the National Electrical Contractors Association. As I see it, we have several different ideas to discuss today, including variable annuity plans and target benefit plans/composite plans. Whatever route we decide to take must allow workers and employers to negotiate a plan and benefits that would allow the economy to expand and employers to remain competitive, while giving those that have worked their entire lives at a middle-class job the ability to enjoy retirement with their loved ones. Our seniors should not have to choose between heating their homes, putting food on their tables or filling a prescription. As always, the devil will be in the details around the specifics of these plans, so I am interested in learning from our great panel of experts about their recommendations for alternative plan designs, and their advice for pitfalls along the way. This is a great way to start the conversation- in a bipartisan, fact finding fashion. I believe we all have the same goal, and I look forward to finding a shared path forward. Because our time is short today, I will keep my comments brief, so that we can hear from our witnesses. I yield back the remainder of my time. ______ Chairman Roe. I thank the gentleman for yielding. Thank you, Mr. Polis. And pursuant to committee rule, 7(c) all subcommittee members will be permitted to submit written statements to be included in the permanent hearing record. And without objection, the hearing record will remain open for 14 days to allow statements, questions for the record, and other extraneous material referenced during the hearing to be submitted in the official hearing record. It is now my pleasure to introduce our distinguished panel of witnesses today. First, Mr. Randy DeFrehn, is the executive director of the National Coordinating Committee for Multiemployer Plans, the NCCMP, based here in Washington, D.C. Mr. DeFrehn has extensive experience working with multiemployer plans. Additionally, he served a three-year term as a member of the Department of Labor's ERISA Advisory Council from 2007 to 2009. Welcome. Mr. Andrew Scoggin is the executive vice president for human resources, labor relations, public relations, and government affairs of Albertsons, LLC of Boise, Idaho. Albertsons is the nation's second-largest supermarket chain, with over 2,300 stores and 250,000 employees. Over the years, Mr. Scoggin has served as an employer trustee for several large multiemployer pension funds. Welcome. Mr. Mark McManus of Annapolis, Maryland is the general secretary-treasurer of the United Association of Journeymen and Apprentices of the Plumbing, Pipefitting, and Sprinkler Fitting Industry of the United States and Canada. His career with the United Association began in March of 1983, when he was initiated into the Plumbers Local 24, and he has held several positions since then. Welcome, Mr. McManus. Mr. Steven Sandherr is the CEO of the Associated General Contractors of America of Arlington, Virginia. AGC represents 27,000 construction and related member firms in 93 state and local chapters. Mr. Sandherr coordinates the association's advocacy work in support of the commercial construction industry and oversees the association's extensive educational safety and networking operations. And welcome, gentlemen. I will now ask our witnesses to stand and raise your right hand. [Witnesses sworn.] Chairman Roe. Let the record reflect the witnesses answered in the affirmative. You may be seated. Before I recognize you for your testimony--and many of you have been here before--let me briefly explain our lighting system. You have five minutes to present your testimony. When you begin, the light in front of you will turn green; when one minute is left the light will turn yellow; when your time is expired the light will turn red. At that point, I will ask you to wrap up your remarks as best as possible, and each member will also have five minutes of questioning. I will now begin with Mr. DeFrehn. You are recognized for five minutes. TESTIMONY OF MR. RANDY G. DEFREHN, EXECUTIVE DIRECTOR, NATIONAL COORDINATING COMMITTEE FOR MULTIEMPLOYER PLANS, WASHINGTON, D.C. Mr. DeFrehn. Thank you, Chairman Roe. Chairman Roe, Ranking Member Polis, and members of the subcommittee, my name is Randy DeFrehn and it is an honor to speak with you once again on the subject of multiemployer retirement security. I am the executive director of the National Coordinating Committee for Multiemployer Plans, which you have referenced a number of times this morning, and we appreciate the acknowledgment. It is also an honor to say thank you on behalf of the more than 10 million participants in multiemployer defined benefit plans, for the bipartisan leadership shown by this committee and subcommittee in the enactment of the Multiemployer Pension Reform Act, which was signed into law last December. That legislation addressed two of the three major categories of recommendations in the Retirement Security Review Commission report, which Chairman Roe had discussed a little bit earlier: Solutions, Not Bailouts. These categories included recommendations to preserve the financial health of more than two-thirds of the plans, which have already or will soon regain their financial stability following the back-to-back recessions since 2000, and recommendations designed to preserve plans headed for insolvency and pay benefits at a higher level than they otherwise would ultimately have received. The third category of the commission's recommendations, which remains to be adopted, concerns innovative new plan benefit structures designed to combine the best features of the current defined benefit and defined contribution plans. It is the need for this remaining set of reforms that I will address today. For a number of employers, recent past developments, including the reemergence of withdraw liability, which several of the other witnesses will elaborate in their remarks, have convinced them that the current DB structure presents an unsustainable and unacceptable risk, causing them to seek other forms of pension coverage for their employees. For these employers, the only other alternative is a defined contribution plan based on an individual account. As a primary form of retirement security versus a wealth accumulation vehicle, however, DC plans present certain inefficiencies which result in lower alternate benefits for average workers. To the commission, this presented yet another challenge: how to structure an alternative plan design for the future that would reduce or eliminate the risks of unfunded liabilities to the employers, yet enable workers to receive a regular monthly retirement income check and maximize the utility of employer contributions. The result of their analysis was a recommendation to encourage the development of innovative shared risk plan designs offering two different models: the variable defined benefit plan and the composite plan. As the variable defined benefit model has already been adopted by a number of plans, and in at least one situation has received a tax qualification letter, my comments will focus on the composite model. The composite plan is neither a defined benefit nor a defined contribution plan under current law. The variable nature of the benefit is neither definitely determinable nor is it based on an individual account. It would be made available to jointly managed multiemployer plans as a successor to their current DB plans. The model includes very clear criteria for the parties to pay off the liabilities of the legacy DB plans as their first priority for contributions. It also requires that the contributions to fund the future accruals be subject to a higher funding standard than is currently required for DB plans. The plan design could mirror the current DB plan, and it can include other current features of DB plans. From the participant's perspective, this new structure would provide higher monthly benefits than would be derived from simply purchasing an annuity from his or her DC account by pooling longevity risk and by limiting other features that result in plan leakage such as loans, hardship distributions, distributions before retirements and lump sums, as more benefits would remain in the retirement plan and benefits would have to be paid as annuities. This new structure is clearly not a DB plan, as benefits are variable based on the market value of assets, as currently happens with all defined contribution plans. Because it is not a DB plan, service earned after adoption would not be subject to the PBGC guarantee nor would employers be subject to withdrawal liability. However, both of these features would remain in place for remaining obligations under the legacy plan. Contributions to both plans would be determined by the plan's actuary. However as the market risk for future service rests with the participant, the minimum contribution requirements to fund the cost of future accruals would be set at 120 percent of the actuarial projected cost to provide a buffer against market volatility. The plan would conduct an annual actuarial valuation to determine whether assets are sufficient to meet that level of funding, projected over a 15-year period. Assuming the plan continues to meet that target, no action would be necessary. And if a sufficient margin were to develop, the plan trustees could consider benefit improvements provided they do not reduce the projected funding below the 120 percent target. If, however, the projections fall below that level, trustees would be required to take remedial action within 210 days of the certification of the plan funding based on a clearly defined hierarchy which resembles actions currently available to DB plans under the PPA, Pension Protection Act, as amended. Because it provides the best of both worlds, many within our community see the composite plan as the next logical step in the evolution of multiemployer plans. Enacting this remaining element of comprehensive multiemployer pension reform will provide greater long-term retirement security for workers by creating a path for contributing employers to remain in, and for new employers to enter, the multiemployer system without assuming existential risks. Thank you for the opportunity to share these thoughts. I welcome any questions you may have. [The testimony of Mr. DeFrehn follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Roe. Thank you. Mr. Scoggin, you are recognized for five minutes. TESTIMONY OF MR. ANDREW SCOGGIN, EXECUTIVE VICE PRESIDENT, HUMAN RESOURCES, LABOR RELATIONS, PUBLIC RELATIONS & GOVERNMENT AFFAIRS, ALBERTSONS, LLC, BOISE, IDAHO Mr. Scoggin. Thank you very much. Chairman Roe, Ranking Member Polis, and members of the subcommittee thank you for inviting me to testify before your today on the incredibly important and timely matter of multiemployer pension reform. Being here reminds me, I had a pleasure of testifying before this committee almost 10 years ago. Thanks to the work and leadership of this committee, and the bipartisan cooperation that it has demonstrated, the Congress made significant progress since my last appearance in June of 2005 to strengthen the multiemployer pension system. And in many respects, my testimony today serves as an endorsement for a number of the proposals under consideration; none of which would be possible were it not for the work this committee has already accomplished. Thank you also to Randy DeFrehn and his colleagues at NCCMP for their thoughtfulness in presenting solutions to this serious problem. To provide a bit of context as I appear before you today, Albertsons, LLC's parent company, named AB Acquisition, LLC also operates New Albertsons Inc. and Safeway Inc., with more than 2,200 stores in 34 states and the District of Columbia. We operate under 18 banners, and you may have heard of some of these: Albertsons, Safeway, Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randall's United, and Carrs, to name a few. With approximately a quarter million employees, 68 percent of which are unionized--primarily with the UFCW, with whom I have had extensive discussions on these matters at the most senior levels of the UFCW including the international president, Marc Perrone--a key aspect of my responsibility is to provide a robust and competitive benefit package for our associates, for their retirees, for our retirees. Over the past two decades, I have personally served as a trustee on the boards of trustees of numerous multiemployer pension funds throughout the U.S. I have repeatedly seen the negative consequences that have resulted from regulatory restrictions, coupled with massive change in the unionized grocery industry, namely the exit of many unionized grocery chains. These have led to enormous obligations shouldered by the remaining contributing employers across the country. In order to solve the significant pension problems we now face, the bargaining parties must be given the types of tools that NCCMP has carefully crafted. Currently, our company actively participates in 31 major multiemployer pension plans. Albertsons Safeway represents 50 percent or more of the contribution base of six of those plans plan. We contribute $350 million annually to our full complement of multiemployer plans. And most significantly, we face right now over $4.8 billion in nominal withdrawal liability under those plans. Today, over 10 million Americans are enrolled in multiemployer pension plans. It goes without saying that all of us--policymakers, legislators, regulators, employers, participants--are responsible for putting a framework in place that safeguards retirement security for this significant segment of the American workforce. Failure to act and to act expeditiously will have potentially catastrophic effects not only on the companies that provide these pensions but, just as importantly, on the employees and their families. Modernizing the regulatory framework for multiemployer pensions is not an easy task. We know that. The structural reforms that Randy has outlined this afternoon will require sacrifice all around and considerable cooperation from all parties, with input and support from industry, from unions, and from employers. I believe this is possible, I have seen this committee do it before. Over the last 10 years, Congress has worked to strengthen ERISA through the Pension Protection Act in 2006; more recently with the MPRA, last Congress, as a strong proponent of PPA. Coupled with MPRA, these pieces of legislation represent a significant improvement to retirement security. But from an employer's perspective, in spite of this progress there remains much to be done to address shortfalls that previous legislation has not yet been able to correct. The policy recommendations presented to you by NCCMP shaped much of the 2014 reform bill and provided a blueprint for what we would like to see happen as we move forward. Now, more than ever, employers are facing incentives to exit the multiemployer pension system and to avoid entering the system. As with most unionized employers, Albertsons continues to pay increasing contributions to troubled pension funds. And I point out that many of these are still suffering from 2008. And, in increasing proportions, our contributions are going toward the pensions of employees whose employers have left the business. Money spent on these funds in keeping them afloat is money we would rather spend on hiring workers, on raising wages, on building new stores, on expanding our business. We need new tools in our toolbox to address the challenges, which were not contemplated when multiemployer pension rules were initially put into place. For example, under existing law neither the bargaining parties nor the trustees have the option of managing a plan that doesn't include the concept of withdrawal liability. New employers have a strong disincentive to participating in troubled plans. Strong operating companies who are potential industry consolidators are disinclined to purchase or to invest in companies with significant multiemployer plans. These are only a few of the many problems within the multiemployer pension system, which we would like to see legislation address. In conclusion, Congress needs to equip employers and employees with the regulatory flexibility necessary to make changes to benefits programs that don't run afoul of our beneficiaries, employers, or the system as a whole. Thank you. [The testimony Mr. Scoggin follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Roe. Thank you, Mr. Scoggin. Mr. McManus, you are recognized for five minutes. TESTIMONY OF MR. MARK MCMANUS, GENERAL SECRETARY-TREASURER, UNITED ASSOCIATION, ANNAPOLIS, MARYLAND Mr. McManus. Good afternoon. Chairman Roe, Ranking Member Polis, and the members of the subcommittee it is an honor to appear before you today on this important topic affecting millions of working men and women. My name is Mark McManus, and I am the general secretary-treasurer of the United Association of Journeymen and Apprentices of the Plumbing, Pipefitting and Sprinklerfitting Industry of the United States and Canada. The UA and its affiliated locals cosponsor, with the collective bargaining partners, more than 150 multiemployer defined benefit plans. The UA welcomes the opportunity to present testimony in this subcommittee in support of this legislation that would modernize the multiemployer pension system by making additional options available to the boards of trustees and collective bargaining parties to continue to provide lifetime retirement income to the employees in the multiemployer plans. Multiemployer plans developed and exist in industries, such as construction, trucking, and entertainment, characterized by frequent short-term employment. In a typical single-employer context, such frequent changes in employment would make it unlikely for employees in such industries to vest in a retirement plan, or if vested to accumulate sufficient benefits to insure adequate retirement. I will speak primarily on the knowledge of the construction industry, but many of the issues and concerns affect other industries, as well. Multiemployer defined benefit plans have enabled skilled workers to earn and retain a pension that provides lifetime income. They provided essential safeguards for financial security of the construction workers and have been the primary form of benefit delivery in the construction industry. While defined contribution plans have replaced defined benefit plans in many industries, in construction they remain as a supplement to defined benefit plans. Many multiemployer defined benefit plans suffered significantly from the investment losses of two economic downturns within a decade. Defined benefit plans in many industries, including construction, sustained further losses from reduced contributions when work on which employer contributions were required remained depressed three years following 2008. Plans that have been solidly funded found themselves in endangered or critical status under the Pension Protection Act. In most cases, unions and employers have worked together to stabilize these plans, but even those plans are recovering financially and are not as secure as they once were due to changes that threatened the continued existence of multiemployer defined benefit plans and the financial security of covered employees. In 2010, financial accounting standards boards proposed changes in corporate financial statements that would have required burdensome and complicated disclosures about potential withdrawal liability to which an employer might be subject if he withdrew from a multiemployer plan. Although this proposal was ultimately modified to limit disclosure, the publicity surrounding this proposal made lending institutions aware that employers potentially faced withdrawal liability. But few are sufficiently familiar with the issues to have even a rudimental understanding that withdrawal liability is only assessed if, and when, the employer ceases to have an obligation to pay into the pension fund. Nevertheless, employers have advised that they now find it difficult to obtain credit. Employers cannot operate with access to credit. And given a choice between the company or withdrawing from a multiemployer defined benefit plan, employers have used various methods to leave these plans. In some cases, an employer will simply negotiate and pay withdrawal liability rather than face continuing uncertainty that even if they make the required contributions, forces beyond their control could cause such liabilities to reemerge. Perhaps more importantly, new employers will not enter the defined benefit plan for fear of withdrawal liability. As employers leave a multiemployer defined benefit plan, no new employers replace them. The contribution base of the plan is severely undermined. Employers and employees may see little advantage to continuing the plan. The NCCMP Retirement Security Review Commission recognized, in Solutions, Not Bailouts, that plans have to be sustainable long-term for the benefit of both workers and plan participants and their families and contributing employers. Both goals have to be achieved at the same time or neither will be achieved. The United Association believes that it is essential to the retirement security of our members to offer a plan that will provide lifetime income. The proposed reforms which remain unaddressed in the last Congress offer a new composite plan design that will preserve the life of the income feature of the defined benefit plan, but will not drive contributing employers out of the system because of the threat of withdrawal liability. The eroding employer support is causing significant harm to traditional defined benefit plans and is currently one of the reasons for the plan's insolvency. PBGC premiums for multiemployer plans projected to become insolvent are adding an extra burden. As long as there is a threat of withdrawal liability, the pool of employers contributing to the multiemployer plans will not increase significantly to support the system. There is a growing trend towards defined contribution plans, which also presents challenges to ensuring the desire for income security to the people and the mobile industries that rely on multiemployer plans. We believe the innovative plan structure provides with composite plans are necessary as an additional option to provide adequate lifetime retirement security to the UA members, amongst others. Composite plans are not permitted under law as proposed by features of defined benefit and defined contribution plans. Mr. Chairman, if I may have another minute? Chairman Roe. You can go on ahead, Mr. McManus. Mr. McManus. Thank you, sir. From the perspective of the UA, the most important feature is that these plans provide the accumulation of benefits and provide a lifetime benefit in a manner similar to traditional defined benefit plans. We understand that in times of economic distress benefits may be reduced. We believe, however, that the advanced funding provisions are sufficient to protect participants. During the preparation of the Solutions, Not Bailouts report, the NCCMP Retirement Security Review Commission actuarially stress-tested the composite plan. It performed well through an economic downturn similar to 2008. Subsequent stress testing of 106 multiemployer defined plans examined to determine the impact of the employer contributions the fund's similar benefit structure demonstrated that the majority of the plans tested can replicate the benefit provided at a lower contribution rate than required for the current members defined in the plan. Furthermore, our Canadian members have plans subject to these provisions. While the debate among proponents of either defined benefit or defined contribution plans continues, we believe it is more constructive to move beyond the rhetoric and focus on the common objective of providing adequate retirement income to men and women who spend their career working for our country. The Multiemployer Pension Reform Act of 2014 gave some new tools to the trustees and the government agencies to save failing defined benefit plans. This helps. But the legislation to provide new tools to the bargaining parties through innovative plans like the composite model is still needed for the future. The proposed composite plan design provides additional options to secure lifetime benefits to the employers. The opportunity for creative solutions for our retirement income dilemma is within our grasp. We strongly encourage Congress to take advantage of it, expand availability offerings, and enable labor and management to find solutions which best meet their specific goals. In closing, I once again like to thank you for your work to improve the retirement security for our members and the rest of the 10.4 million participants. Thank you. [The testimony of Mr. McManus follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Roe. Thank you, Mr. McManus. Mr. Sandherr, you are recognized for five minutes. TESTIMONY OF MR. STEVE SANDHERR, CHIEF EXECUTIVE OFFICER, ASSOCIATED GENERAL CONTRACTORS OF AMERICA, ARLINGTON, VIRGINIA Mr. Sandherr. Thank you, Mr. Chairman, Ranking Member Polis, and members of the subcommittee for the opportunity to testify today on behalf of the Associated General Contractors. My name is Steven Sandherr, and I am the CEO of AGC, the leading association for the construction industry. AGC represents more than 27,000 firms consisting of both union and open shop contractors engaged in building our nation's infrastructure. The vast majority of our member firms are small and closely-held family businesses. I should point out that I have represented the construction industry for the last 30 years, and I recognize how unusual it is for me to walk into this particular room and be on the same side with the Building Trades Unions offering a solution to a problem. The Building Trades deserve credit for their advocacy in the last Congress in support of the reform measures that we are discussing today. And, of course, we thank the committee and Congress for passage of the Multiemployer Pension Reform Act of 2014. This series of long-overdue and necessary reforms track closely with the joint labor-management reform proposal AGC participated in with the NCCMP in 2013: Solutions, Not Bailouts. Looking forward, AGC encourages Congress to act promptly on an important component of the Solutions, Not Bailouts proposal that was not included in last year's law: changing the law to recognize a new composite plan design. This would give collective bargaining parties or plan trustees the option to decide whether to adopt a composite plan model, which more equally distribute some of the risk associated with retirement plans so employers don't have to shoulder the entire burden. The new plan design is essential to the shared goal of protecting both those who earn benefits and those employers that contribute retirement benefits to those plans. Under the current defined benefit system, the creation of contingent withdrawal liability makes the employer liable for the ups and downs of investment returns and the size of the asset base. This model creates a system that imposes crippling withdrawal liability and little remedies for employers to account for their exposure. In most cases, under the current rules an employer will never be able to pay down its liabilities. Let me briefly highlight the potential benefits for both employers and employees if a composite plan were adopted. For employees, they would get increased fund stability; secondly, retain a guaranteed benefit; and third, it provides for the potential of higher wages because the pension share of the overall compensation package will be reduced. For employers, it eliminates the potential for withdrawal liability, which can be crippling to contributing employers and is a major barrier to new employer participants. Withdrawal liability can also affect a company's bonding ability and their ability to sell or pass down a company to the next generation. The composite plan structure is innovative, but not untested. It is similar to the model that is in practice throughout much of Canada and has been successful there. It mimics the U.S. plan design prior to the enactment of ERISA. Let me point out that the adoption of a composite plan design would not eliminate legacy liabilities under existing defined benefit plans. The employers will continue to make contributions to the pension trust, where a portion of the contribution would then pay down legacy costs and a portion would go towards the new plan. Acting quickly to allow composite plan designs is important because the industry has finally begun to expand again, giving employers and employees their best chance to add new plan participants in over a decade. With the vast majority of construction industry plans returning to the green zone, this is a perfect opportunity to adopt these changes and provide limited disruption of benefits for participants. Transitioning to the new plan design will also eliminate unfunded liabilities and, in turn, future PBGC liabilities. Regarding the PBGC, they reported potential insolvency and the need for additional funding. I would encourage Congress to allow the recent premium increase to take effect and allow plans to take advantage of last year's tools before any additional increases are levied on plans. In conclusion, the Multiemployer Pension Reform Act was a step in the right direction. It provides many needed reforms to the multiemployer system. But Congress should also enact additional reforms to the system that allow multiemployer plans to modernize by choosing from additional retirement plan models, including the composite plan concept. Thank you for this opportunity to testify. I would be pleased to answer any questions that the members of the subcommittee may have. [The testimony Mr. Sandherr follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chairman Roe. Thank you, Mr. Sandherr. I will now recognize myself for five minutes. I think the title of the bill that we began last year, we had three titles, we left the third title off, which maybe that was a good thing. We will have a chance to rehash it and hear why it needs to be done. But it sounds to me like--just in summary--what I heard was with the withdrawal liability that is out there now for employers: it discourages them going in. Number two, it reduces the ability for them to borrow money to expand their business. Because when the bank looks--or their loaning institution looks--at their liability, their balance sheet, they see this, in Albertsons' case, a $4 billion liability. That would make you pause. And we have had no new tools in decades to meet these needs. So, what I heard you all say really almost uniformly was, this is very much needed for the economy, for the worker. And the new composite plan would provide a stable guarantee, or a relatively guaranteed income so someone would know what they are going to get at the end of the day. The current legacy plans, the current plans as they are, would continue. Is that correct? The question I have then is, how, what--should we get this done? How quickly should we get it? In other words, how important is it to do now and not put this off? Are the plans in need of this now? Not two years from now or next administration or whatever, but now? And anyone can take that question. Mr. Scoggin. I would be glad to speak from the employers' standpoint to say that we feel like we are at a precipice. We have got a bus that is headed over a cliff and we really need to turn the bus quickly. And waiting a year or two years, many of the challenges that already have snowballed are going to continue to grow. And all this does is give collective bargaining parties, which is both the unions and the employers, the ability to meet together to address these problems. So quicker is not only better, but probably essential. Chairman Roe. Thank you. Mr. DeFrehn, would you explain to me just how pooling longevity risk, how that works to lower the-- Mr. DeFrehn. Certainly. If you think about a current defined contribution plan, a 401(k) plan, you have accumulated an amount of money in an account. And when it comes time to retire, even if you consider yourself the average guy in an average industry--say you are a plumber--the average life expectancy in the plumbing industry may be age 72, as demonstrated in the defined benefit plans. So you think, well, you know, I am the average guy, I will just use this money. I will draw it down, and I probably won't live past 72. You didn't really take into account the fact that both of your parents lived into their late 80s. So by the time you get to your late 80s, since you are in a risk pool of one, you will have wished that you would have died at 72. Unfortunately, what the risk pool in a current defined contribution does is, it does not allow you to maximize the contributions. If, in this model, we could take those contributions--we can pool the risk of longevity, the longevity risk--we can allow then the benefit structure to be designed around that mortality, the average mortality of the group, which allows the person who would have to set aside those dollars for his advanced years, into his 80s, to be able to draw down the full benefit as though he were age 72. It takes those people who won't live as long and allows the savings from those people to pay the benefits for the people who live longer. Chairman Roe. Well, I think we mentioned this yesterday in a meeting you and I both attended_that when the Atlanta airport opened that life expectancy in America was 57. The year I was born it was 62. Social Security worked great then. But we know people are living longer and longer and longer, and that is not about to reverse any time soon. It is going to get longer. So I think this new plan gives us a tool, gives you all the tools--and unions and the employees, employers I mean--an opportunity to provide a benefit throughout that lifetime that is fairly predictable as opposed to the train wreck that we were facing last year. I will now yield to Mr. Scott. I will yield to you five minutes. Mr. Scott. Thank you, Mr. Chairman. And thank you, as you mentioned, this is an issue that we are trying to work on from a bipartisan perspective. And one of the challenges is that we are constrained by fundamental principles of arithmetic; if the money isn't there, you can't wish it there. You got to come up with some solutions. And working together, I hope we can get there. Mr. DeFrehn, one of the problems we have is that every 20 years or so the stock market collapses. So all these funds that are invested in equities, all of a sudden about once every 20 years becomes essentially insolvent. What is the problem with requiring the funds to purchase insurance products like annuities so that the ups and downs of the market will be the problem of the insurance company, not the beneficiary, not the employer, and certainly not the last man standing? Mr. DeFrehn. Well, thanks for that question, Mr. Scott. Well, you know, the idea of purchasing an annuity is not a new one. And in earlier times during my career I have seen funds use that mechanism to offload some the liabilities when the interest rates are higher. Currently, the interest rates for an annuity are below 3 percent, looking at a purchased annuity. If you were to fund that kind of a benefit through the current structure, the DB system, for a $1,000 benefit--if you were to go out into the annuity market right now and purchase it--you would get--the equivalent of that would be about $657. If you were to try to then increase and say, well, what would be the additional contribution required to provide an equivalent benefit as the one paid through the trust funds, you would have to increase contributions by about 52 percent. It is all a function of interest rates. Now, I remember back in the late 1970s--many of us around here remember the mid-1970s--when the interest rates were very high. I remember having a mortgage rate of 14 percent. And there were guaranteed investment contracts being paid by the insurance industry at that time at 20, at 18 percent. Mutual Benefit Life, Pilot Life, Executive Life were all guaranteeing those kinds of returns. You might notice that none of those plans, those companies, are still around. And although the trust funds who had purchased some of those guaranteed instruments were able to regain most of the money that they had thought they were going to get. Again, there are still no guarantees. There is never-- Mr. Scott. Well, part of the problem is you say you can't get a rate of return. Well, it is a phantom rate of return because you could get, for 19 constructive years a nice fat rate of return and in the 20th year it collapses. What the insurance company does is kind of smoothed it out so that you get a real rate of return every year without the collapse. And so what if you are trying to maximize the rate of return, it's looking great for 19 out of 20 years. But when it collapses, here we are. Let me ask another question. And that is, is there a problem--instead of a pooled fund, is there a problem--what is the problem with having everyone with their individual account? That is, as a worker goes from place to place the employer would contribute to his fund; insurance products or whatever else you are buying. That way, there would be essentially no long-time liability. Once you have made your payment, bought your insurance product, you are done. There is no last man standing problem. And the fund would be free from bankruptcy of the company, it would be free from future liabilities and free from last man standing problems. Mr. DeFrehn. I think you have described what we are envisioning in the new composite model. Remember, multiemployer plans are the one part of the economy where the--one of the promises of ERISA that has actually come to bear. And that is allowing portability from moving from one employer to another. And so what we are suggesting is something not unlike what you are saying. And there are a number of multiemployer defined contribution plans out there who do what you are suggesting. They have an individual account, and that moves with the individual. Mr. Scott. My time is almost up. Is your proposal totally prospective? What does it do for the mess we are presently in? Mr. DeFrehn. Pardon me? I didn't-- Mr. Scott. What does it do for the mess that we are already in? Is it prospective totally, or does it help get us out of the mess we are in? Mr. DeFrehn. Well, for the plans that choose to go this direction there would be the ability to do a one-time fresh start of their current liabilities. So, in essence, they are remortgaging a 15-year mortgage over 30 years; lowering those costs, allowing the plan to then be able to pay the additional costs of having a higher funding requirement for the new service under the new plan. We are suggesting a 20 percent buffer be built in to effectively provide a buffer against market volatility there. But the 20-year--or excuse me, the 30-year--reamortization would be for the legacy plan, and the contributions coming into the plan would have to pay off that legacy before any dollars flow through to the new accruals. So we are paying off those old liabilities over a 30-year time frame. That is the target. Chairman Roe. Okay, thank you, Mr. Scott. Mr. Walberg, you are recognized. Mr. Walberg. Thank you, Mr. Chairman, and thanks to the panel. Mr. Sandherr, I want to ask you the question about since the passage of the Multiemployer Pension Reform Act in December, whether the overall situation for employers and employees who participate in the multiemployer pension plans is better today than it was before. But before you go into that, if you would expand a bit on your testimony, you mentioned in your testimony that legacy costs from the accrued liability of unfunded vested benefits may continue to be a problem for employees. Expand on that a bit, and then tell me what is the outcome of the Act. Mr. Sandherr. To the second part of your question, the legacy costs are expanding because of a number of factors. You know, up until recently we have had the downturn in the industry so you have less hours worked. You have retirees living longer; you have fewer contributions into the plans. So that is the challenge on the legacy costs. And then the first part of your question with regards to whether we are seeing improvements based upon what was enacted in December. I would say that, one, we are aware of plans that have already gone to the Department of Treasury to seek the relief that is offered under the Act that was enacted in December. The day that the bill was signed into law, I am told there were people banging on Treasury's door looking for guidance on how they can incorporate the reforms that were enacted. Secondly, I think it gives plans, multiemployer plans, in our industry some additional breathing room, that they know that there are tools that they can go to, the threat of insolvency is not as great or as high as it was prior to the enactment of that. But the missing component in all of this is the composite plan; the ability to be able to reform the existing plans to ensure that there is an ongoing guaranteed benefit to the retirees; and, also reducing the liability for the employers. I can tell you, in my travels to our chapters it is not the guys that are my age that are asking the questions about this issue. It is the sons and daughters of the fathers of the companies that are in their 30s and early 40s that are wondering if there is going to be a company for them to take over when their father retires. And they are well aware of this composite plan option and they are eager for its enactment. Mr. Walberg. Anything with composite plan that we miss? Mr. Sandherr. Anything that you have missed? Mr. Walberg. That we miss in dealing with some of these concerns, say, for the younger generation, for the employees themselves. Mr. Sandherr. Well, I mean, we don't have the legislative approval yet for the composite plans. Mr. Walberg. Right. Mr. Sandherr. So, you know, if you start drafting that language, I know Randy is here to help you, to make it right so that we don't miss anything. And I think what we have offered in Solutions, Not Bailouts is a general design for how you attack that. Mr. Walberg. Okay, okay. Mr. Scoggin, Albertsons participates in a number of multiemployer plans, as you have indicated. Can you discuss some of the challenges facing those plans and how they have affected your company in a little broader detail? And then in particular how have concerns about underfunded legacy liabilities that we mentioned here affected the company's transactions and growth? Mr. Scoggin. The questions are excellent. They are questions that we deal with extensively as an entity. With respect to how underfunded pension plans impact us, I would say they impact us in a number of ways that both deal with us internally as a company and also at the bargaining tables as we deal with the unions that represent employees of ours across the table. We are not able to generally, you know, direct the monies we might like to other areas for those employees, such as wage increases that those who aren't burdened by these legacy problems and future accruing problems have to deal with. Because we see with rehabilitation plans and with just the trajectory that these plans are going in that more and more money is being focused on plans that are in trouble. They are going to have a very difficult problem coming out of that trouble without having something along the lines of these composite type options, as the tools in our toolbox, to bring them out. So now money is not going to health care, money is not going to wages, money is not going to build more stores. We look at companies that we think would be a nice fit with our company and those that are for sale, basically, that are, you know, struggling with a number of operational issues. That would be a great fit for us, and we think we could, you know, help them, help the economy they are in, and also help our company. But we look at these companies and say that company now has half a billion dollars worth of withdrawal liability. Do we want to take that on, even if every other piece of that company's a great fit for us--and we know other strong players within the industry look at these things the same--and therefore I think it slows down economic decisions, and certainly it hurts us as we try to expand workforces, try to add hours, and try to add employees. So right now, I would say with respect to all of the areas that we look at--wages, health and welfare, pensions, training, development, hiring--pension right now is under that big glaring-- Mr. Walberg. Blockage. Mr. Scoggin. Yes, just a big concern that-- Chairman Roe. Mr. Scoggin, I am going to ask you to wrap up. We have votes going on so we will need to-- Mr. Walberg. Thank you, Mr. Chairman. I yield back. Chairman Roe. Mr. Polis, you are recognized. Mr. Polis. Thank you. And we will have other members who will likely submit their comments, written, to you. And we do have votes again so I will be brief. But I did want to go to Mr. Scoggin. I understand that variable annuity plans are a form of defined benefit plans under existing law. What are the barriers to adoption, and why do you think employers and plan trustees are hesitant to adopt these kinds of plans where they are currently available? Mr. Scoggin. Variable annuity plans in particular? Mr. Polis. Yes, what stands in the way of broader adoption under the current rules? Mr. Scoggin. I would probably begin with the fact that, you know, we have--this isn't simply an employer issue. So I don't know, I can't speak specifically for the unions. But we have almost never--in fact, I can say never--in, you know, almost 30 years of bargaining with UFCW, with Teamsters, with others had them be willing to consider variable annuity plans, as well. So I can't really address the details of them. What I can say is that what we have run into, and Mr. DeFrehn spoke of this with respect to annuities as they exist today, is that when you want them they are too expensive and when you don't need them then you are not going to buy them. Mr. Polis. Let me go to Mr. McManus and Mr. Sandherr, for either one or both of you, regarding composite plan designs. My understanding is that one idea is that plans could voluntarily transition from defined benefit to a new composite plan. Does the concept of composite plan design appeal to both labor and management is my question, and that is briefly my question for McManus and Sandherr. Mr. Sandherr. Yes. Mr. DeFrehn. Absolutely, yes. Mr. Polis. Okay. And finally, Mr. DeFrehn, I wanted to ask what current plans--are there a lot of current plans that are likely to use the new option, and would it be for deeply troubled or declining number status plans or critical status plans or even green plans? Mr. DeFrehn. I think there is great interest in this, as you heard, from the labor and employer side of the table. Particularly on the employer side they, as you have heard, there is extreme interest. There are some industries that have said, well, you know, it sounds like an interesting concept, but we are--we are happy with the defined benefit plan. And I think that will be an industry-specific question. As far as the second--the second part of your question--would you repeat that again, sir? Mr. Polis. I was just going to--where was I? I was asking do you see this as something mostly for deeply troubled or plans that are declining in status? Mr. DeFrehn. If the plan is too far gone it would be difficult to be able to negotiate the payoff of the plan over the 30-year period on the legacy cost. So chances are this will be for plans that are recovering and that are green zone plans or yellow zone plans headed to the green. Eventually, you will get to the point where that will be something that, most of those plans, will want to consider anyways. Mr. Polis. Thank you. And I yield back the balance of my time. Chairman Roe. I thank the gentleman for yielding. Do you have any closing remarks? Mr. Polis. Yes. Briefly, Mr. Chair, I feel we have learned a lot from this terrific panel, a panel that has members that are often on opposite sides of other issues. But on this specific issue there does seem to be a lot of agreement. Our entire panel knows that we need to take action. Doing nothing to preserve the multiemployer pension system is simply not a viable alternative, whether you are a Republican or a Democrat. And I look forward to working with Dr. Roe and many on both sides of the aisle to continue gathering the facts and create a proposal that protects retirees and allows flexible plans that will not bankrupt the system. I want to thank you all for your time, and I yield back the balance of my time. Chairman Roe. I thank the gentleman for yielding. And as I said before we started we weren't going to have votes, but we are having votes. That is the way this place works. You all have very clearly laid out the problem, as you did last year--and the previous three years--about the problems that multiemployer pension plans face. And now you need another tool in your toolbox, and that is what you are at Congress asking for. It is a very reasonable ask. I think that we are going to work to make that happen, to come to fruition. I think we can see that. It probably won't be the last time. It won't cure every ill. We will be here again for some other changes. But this is just another tool that the plan administrators and employers and union members have to secure a future retirement. So I appreciate very much, again, the expert panel that we have. And with no further remarks, our meeting is adjourned. [Additional submissions by Dr. Roe follow:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [Whereupon, at 3:32 p.m., the subcommittee was adjourned.]