[Congressional Record Volume 140, Number 141 (Monday, October 3, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[Congressional Record: October 3, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
               PENSION ANNUITANTS PROTECTION ACT OF 1993

  Mr. WILLIAMS. Mr. Speaker, I move to suspend the rules and pass the 
Senate bill (S. 1312) to amend the Employee Retirement Income Security 
Act of 1974 in order to provide for the availability of remedies for 
certain former pension plan participants and beneficiaries.
  The Clerk read as follows:

                                S. 1312

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Pension Annuitants 
     Protection Act of 1993''.

     SEC. 2. CIVIL ENFORCEMENT OF ERISA.

       Section 502(a) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1132(a)) is amended--
       (1) by striking the ``or'' after the semicolon at the end 
     of paragraph (5),
       (2) by striking the period at the end of paragraph (6) and 
     inserting ``; or'', and
       (3) by adding at the end the following new paragraph:
       ``(7) in the event that the purchase of an insurance 
     contract or insurance annuity in connection with termination 
     of an individual's status as a participant covered under a 
     pension plan with respect to all or any portion of the 
     participant's pension benefit under such plan constitutes a 
     violation of part 4 of this title or the terms of the plan, 
     by the Secretary, by any individual who was a participant or 
     beneficiary at the time of the alleged violation, or by a 
     fiduciary, to obtain appropriate relief, including the 
     posting of security if necessary, to assure receipt by the 
     participant or beneficiary of the amounts provided or to be 
     provided by such insurance contract or annuity, plus 
     reasonable prejudgment interest on such amounts.''.

     SEC. 3. WAIVER OR REDUCTION OF CIVIL PENALTY.

       Section 502(l)(3)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1132(l)(3)(B)) is amended by 
     inserting ``(or to provide the relief ordered pursuant to 
     subsection (a)(7))'' after ``to restore all losses to the 
     plan''.

     SEC. 4. EFFECT ON OTHER PROVISIONS.

       Nothing in this Act shall be construed to limit the legal 
     standing of individuals to bring a civil action as 
     participants or beneficiaries under section 502(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1132(a)), and nothing in this Act shall affect the 
     responsibilities, obligations, or duties imposed upon 
     fiduciaries by title I of the Employee Retirement Income 
     Security Act of 1974.
  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Montana [Mr. Williams] will be recognized for 20 minutes, and the 
gentleman from Nebraska [Mr. Barrett] will be recognized for 20 
minutes.
  The Chair recognizes the gentleman from Montana [Mr. Williams].
  Mr. WILLIAMS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, S. 1312 is designed to help workers and retirees whose 
pension plans were terminated and turned over to insurance companies 
that later went insolvent.
  The Employee Retirement Income Security Act of 1974 (ERISA) has 
always authorized participants and beneficiaries under employee benefit 
plans to bring suit in Federal court against plan fiduciaries who have 
breached their duties under the plan or who have violated the terms of 
the plan or the statute.
  This bill, which passed the Senate by unanimous consent, is a 
bipartisan approach to resolve a specific problem that has arisen from 
the termination of hundreds of well-funded, federally insured pension 
plans during the 1980s. The pensions earned by the workers and retirees 
in those plans were often paid in the form of monthly annuities 
purchased from a variety of insurance companies, including the 
Executive Life Insurance Company of California.
  In April of 1991, state regulators in California took control over 
Executive Life after it failed to make good on its obligations to more 
than 44,000 pension annuitants across the country. The pensions of 
retirees were reduced and today, more than three and half years later, 
many of those individuals have still not been made whole.
  In some cases, the fiduciaries of the pension plans may have 
purchased the Executive Life annuities without giving adequate 
attention to the financial safety of the annuities. Instead of choosing 
a safer, more expensive annuity, buying an annuity from Executive Life 
allowed some employers to receive a substantially larger reversion of 
excess assets from the plan, thus freeing up a greater amount of money 
to be used for other corporate purposes.
  When some retirees and the Secretary of Labor sued certain 
fiduciaries under ERISA to recover the losses, some of the fiduciaries 
argued that the retirees were no longer participants of the plan 
because the plan had terminated and, therefore, had no standing to sue 
them. These fiduciaries also argued, based on a 1993 Supreme Court 
decision, Mertens v. Hewitt Associates, that ERISA provides no 
effective remedy to make people whole for the losses incurred.
  Unfortunately, a few lower courts have narrowly and mistakenly given 
favorable consideration to these arguments. These courts have denied 
standing to sue to individuals who were participants and beneficiaries 
under the plan at the time the alleged breach of fiduciary duty (or 
violation of the terms of the plan or of ERISA) occurred, but, because 
of the intervening plan termination, were not literally participants 
under the plan at the time the lawsuit was brought.
  S. 1312 clarifies that in litigation to recover these lost benefits, 
individuals who were participants and beneficiaries at the time the 
alleged violation of ERISA occurred may sue and recover money damages 
from their employers or other fiduciaries. Under S. 1312, they can at 
least receive the amounts that were promised by the insurance contract 
or annuity, plus reasonable interest. S. 1312 also clarifies that when 
the Department of Labor sues on behalf of such a participant and 
beneficiary, any appropriate relief, including money damages, may be 
granted.
  S. 1312 does not represent a change from current law, but rather a 
clarification made necessary because of recent court decisions. The 
courts have wrongly held that annuitants are not plan participants and 
therefore lack standing under ERISA to challenge the decision of the 
plan fiduciary to dispose of plan assets by purchasing annuities.
  Because S. 1312 is designed to overturn this line of specific court 
cases, no limiting inference should be drawn with respect to standing 
questions for annuitants under any other section of any title of ERISA. 
To the contrary, other standing issues should be guided by the broad 
remedial policy reflected in today's legislative clarification, not by 
the incorrect court holdings that we reject today.
  In addition, because the bill merely clarifies the standing of 
pension annuitants and specifies remedies available for fiduciary 
breaches that occur in the purchase of their annuities, the bill is 
retroactive to May 31, 1993, the day before the Mertens decision was 
issued.
  The Mertens decision, which was decided by a 5 to 4 majority of the 
Court, raises other important issues regarding the nature of relief 
available under ERISA for breaches of fiduciary duty. Because there is 
disagreement about how these other problems should be addressed, the 
bill before us today does not attempt to solve all of the problems 
raised by Mertens.
  Instead S. 1312, as shown by its unanimous approval by the Senate, is 
a first step toward correcting several erroneous interpretations of 
ERISA which have unfortunately narrowed the rights and remedies that 
Congress made available to participants and beneficiaries under ERISA. 
The bill is narrowly targeted to give pension annuitants who suffered 
as a result a plan fiduciary's action in purchasing their annuities, 
and the Secretary of Labor bringing suit on their behalf, a fair chance 
to have their cases determined in court on the merits and, if 
successful, to obtain an appropriate remedy.
  Mr. Speaker, I ask unanimous consent to include in the Record the 
letter of support that Chairman Ford received from Secretary of Labor 
Robert Reich on behalf of the administration.
  The Secretary notes in his letter that while passage of the 
legislation before us today is an important first step, further 
legislation is needed to fully protect workers and retirees who have 
suffered losses due to breaches of fiduciary duty. I agree. In the next 
Congress, I intend to work with my colleagues on the other side of the 
aisle and with the administration to enact such additional legislation.
  But today we must pass S. 1312 to restore the previous right of 
workers to sue for monetary damages in cases where pension benefits 
have been lost because of an ERISA violation in the purchase of 
annuities. I urge support for S. 1312.

                                     U.S. Department of Labor,

                               Washington, DC, September 30, 1994.
     Hon. William D. Ford,
     Chairman, Committee on Education and Labor House of 
         Representatives Washington, DC.
       Dear Mr. Chairman: I am writing to provide you with the 
     views of the Administration on S. 1312, the ``Pension 
     Annuitants Protection Act of 1993,'' as passed by the Senate. 
     I understand that this measure is about to be considered by 
     the House of Representatives.
       The Administration views this legislation as an important 
     effort in ensuring that the interests of plan participants 
     are protected against violations of fiduciary responsibility 
     when they receive their pension benefits through the purchase 
     of insurance annuities. We share the strong concern of 
     Senator Metzenbaum and Senator Kassebaum, the authors of S. 
     1312, that retirees should have adequate remedies to enforce 
     the retirement promises made to them and, in particular, the 
     obligations of plan fiduciaries when insurance annuities are 
     purchased to guarantee such promises.
       S. 1312 helps respond to the Supreme Court's decision in 
     Mertens v. Hewitt Associates and to a U.S. district court 
     decision in Kayes v. Pacific Lumber. In Mertens, the Supreme 
     Court held that participants and beneficiaries of an employee 
     benefit plan could not receive monetary damages under the 
     Employee Retirement Income Security Act (ERISA) for losses 
     resulting from a non-fiduciary's knowing participation in a 
     fiduciary breach. In Kayes, the court ruled that former 
     participants and beneficiaries lack standing to bring a suit 
     alleging fiduciary breaches in connection with the purchase 
     of their pension distribution annuities.
       S. 1312 would make it clear that an adequate monetary 
     remedy is available to, among others, former participants and 
     beneficiaries who received insurance annuities from Executive 
     Life Insurance Company of California in violation of the 
     fiduciary responsibility requirements of ERISA, and also 
     expressly provide that such individuals have standing to seek 
     such remedies. This is an important step in overcoming the 
     problems created by Mertens and Kayes. We therefore support 
     prompt passage of S. 1312. At the same time, in the wake of 
     these decisions, we continue to believe that further 
     legislation is needed to fully protect former participants 
     and beneficiaries who have suffered losses due to breaches of 
     fiduciary duties. We look forward to working with the next 
     Congress toward this end.
       The Office of Management and Budget has advised that there 
     is no objection to the presentation of this report from the 
     standpoint of the Administration's program.
           Sincerely,
                                                  Robert B. Reich.

                              {time}  1950

  Mr. Speaker, I reserve the balance of my time.
  Mr. BARRETT of Nebraska. Mr. Speaker, I yield myself such time as I 
may consume.
  Mr. Speaker, I will speak in support of the bill, S. 1312, as passed 
by the Senate on October 28, 1993. The legislation is bipartisan and 
noncontroversial.
  The bill addresses a problem under the current pension law, wherein 
former pension plan participants may be denied appropriate relief to 
remedy certain fiduciary breaches. In particular, S. 1312 would amend 
the Employee Retirement Income Security Act of 1974 [ERISA] to allow 
the Secretary of Labor and former pension participants to seek 
appropriate relief, when ERISA violations involving the purchase of 
annuities occur in connection with the termination of a pension plan, 
or an individual's status as a participant.
  In July of 1993, the Subcommittee on Labor-Management Relations held 
an oversight hearing on this annuity issue, among other ERISA 
enforcement issues. During the hearing, concern was raised that, after 
the decision by the Supreme Court in Mertens versus Hewitt, current law 
could be read as narrowing the remedies under ERISA upon which 
participants and beneficiaries have previously relied, to fully restore 
denied pension plan benefits. Specifically, there was concern that the 
case could undermine the efforts of the Department of Labor to recover 
the reduction of annuity payments for former pension plan participants. 
In the case of Kayes versus Pacific Lumber, which was cited in the 
Mertens case, the U.S. District Court for the Northern District of 
California held that former participants and beneficiaries who were 
given executive life annuities, do not have standing to sue under Title 
I of ERISA.
  S. 1312 would clarify that ERISA does give standing to former 
participants and beneficiaries, if they seek relief in connection with 
a fiduciary breach involving the purchase of insurance contracts or 
annuities. Under S. 1312, this standing would be retroactive in 
connection with legal proceedings pending, or brought, on or after May 
31, 1993.
  My understanding is that there are a number of cases wherein the 
pension rights of former participants could be in jeopardy. Therefore, 
I urge my colleagues to expedite the passage of this bill clarifying 
the extent of ERISA civil remedies for pension plan participants.
  Mr. GOODLING. Mr. Speaker, I rise in support of the bill, S. 1312, as 
passed by the Senate on October 28, 1993. The bill is noncontroversial.
  On August 2, 1993 the Senate held a hearing before the Subcommittee 
on Labor on S. 1312. The bill passed the Senate by unanimous consent on 
October 28, 1993. Senators Kassebaum and Metzenbaum have asserted their 
commitment to the passage of the bill. This bipartisan bill would 
provide for the availability of remedies for former pension plan 
participants and beneficiaries who could be denied pension protections 
under ERISA. More specifically, S. 1312 would grant appropriate relief 
when ERISA violations concerning the purchase of annuities occurs as a 
result of the termination of a pension plan. I agree with Senator 
Kassebaun that it is important that we move this clarifying legislation 
forward because as she said ``recent court decisions [have called] into 
question whether [persons receiving] pension distribution annuities 
have standing to sue for relief under ERISA and whether, assuming a 
violation is found, a court can order relief for their lost benefits 
and help safeguard them against loss of benefits in the future.''
  The need for S. 1312 arose out of the U.S. Supreme Court case, 
Mertens versus Hewitt. This case effectively narrowed the legal 
protections available to retirees. During the August 2, 1993 Senate 
hearing, Ms. Olena Berg, Assistant Secretary for Pension and Welfare 
Benefits Administration for the Department of Labor stated, ``under 
Mertens courts may conclude that they cannot reward retirees the 
difference between their promised benefit and the actual annuity 
payment even where a fiduciary admits to violating ERISA.'' Ms. Berg 
further stated that ``in the case of Kayes versus Pacific Lumber, a 
U.S. district court held that workers and retirees did not have the 
right to sue under ERISA for violations in the annuity purchase.''
  Because participants may not have the ability to seek relief, I feel 
it is necessary to pass S.1312 in order to protect their pension 
benefits. Under the bill, former participants and beneficiaries would 
be given standing to seek appropriate relief to restore pension 
reductions resulting from fiduciary breaches. Since the bill is 
bipartisan and noncontroversial, I ask that my colleagues support the 
bill.
  Mr. BARRETT of Nebraska. Mr. Speaker, I yield back the balance of my 
time.
  Mr. WILLIAMS. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. DeFazio). The question is on the motion 
offered by the gentleman from Montana [Mr. Williams], that the House 
suspend the rules and pass the Senate bill, S. 1312.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the Senate bill was passed.
  A motion to reconsider was laid on the table.

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