[Congressional Record Volume 141, Number 163 (Friday, October 20, 1995)]
[Extensions of Remarks]
[Pages E1996-E1997]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       RECONCILIATION PROVISIONS

                                 ______


                        HON. MATTHEW G. MARTINEZ

                             of california

                    in the house of representatives

                       Thursday, October 19, 1995

  Mr. MARTINEZ. Mr. Speaker, as Will Rogers once said ``All I know is 
what I read in the newspapers'' and over the past few weeks, I have 
been reading about a provision that is, I am told, being wrapped into 
the massive reconciliation bill that is coming to the floor shortly.
  Last month, after 7 hours of floor debate, this House passed H.R. 
1594, the Pension Protection Act of 1995.
  The purpose of that bill, we were told, was to protect America's 
seniors from the alleged dangers in the form of so-called economically 
targeted investments.
  Because I have yet to be convinced that any action of Secretary of 
Labor Reich might have changed the rules under the Employee Retirement 
Income Security Act [ERISA] which require pension fund managers and 
trustees to act in the sole interests of the participants in pension 
plans, I could not support H.R. 1594.
  The crocodile tears shed by the proponents of that legislation were 
almost legendary on this floor.
  Now I read about something that should cause those same Members to 
shed more than tears, because, hidden in this massive tax bill is a 
provision that spells doom for the pensions of all Americans.
  In the early 1980's, we saw corporations making use of so-called 
excess pension assets--those not needed to pay immediate pension 
benefits--for purposes that were certainly not in the interests of 
retirees.
  It took a case like Pacific Lumber, and its cozy relationship with 
Executive Life, to bring out the significant dangers inherent in these 
activities.
  As you may remember, Pacific Lumber was acquired in a leveraged 
buyout by another company, and the first thing the purchasing company, 
Maxxam, did was to terminate the pension plan that Pacific Lumber had 
provided for its employees.
  Because legally they could not just walk away from the current 
retirees, they purchased insurance from Executive Life to guarantee the 
retirement benefits.
  Of course, Executive Life was chosen because it was the low bidder, 
but it was also the holder of a significant proportion of the junk 
bonds issued in connection with the leveraged buyout, as well as other 
questionable investments. Executive Life failed, as we all know, and 
the retirees were left holding an empty bag.
  Because of abuses like that, in 1990, Congress decided to limit the 
uses for which any company can put so-called excess pension assets.
  And we limited access to those funds solely to allow the company to 
fund retiree health insurance programs, and imposed an excise tax of 50 
percent where the company ended the plan.
  Now, I am told, the Republicans, in the name of fiscal responsibility 
are seeking to expand the uses to which corporations can put these 
funds--to any purpose they wish to make of the funds.
  They can use the funds to pay themselves even more lavish salaries or 
perks--to acquire other companies and close other factories--putting 
even more workers out of jobs--or just to have a party.
  Of course, they could use this excess accumulation to provide a COLA 
or adjust benefits for participants, but I don't think that is likely.
  To the extent that a withdrawal is made--the company making the 
withdrawal must pay income taxes on that amount.
  And the bean counters over at Ways and Means have translated this 
into a windfall for the Treasury of $10 billion.
  Well, based on what I have read about corporate tax liabilities over 
the past decade, that would be almost miraculous.
  Current corporate tax rates top out at around 34 percent.
  Corporations would have to draw down nearly $40 billion to produce 
that kind of tax, not considering all of the other factors, such as the 
fact that those taxes would be offset by loss carryovers, credits, and 
other adjustments.
  So we are looking at a potential pension grab of tens of billions of 
dollars--with absolutely no protection for the pensioners or those 
workers who continue to expect their retirement to be protected.
  And, there is no provision for notice to anyone, especially the 
participants and beneficiaries.
  And another quiet little aspect of the provision is that the amount 
that can be withdrawn from pensions is based on a valuation date of 
January 1, 1995 or earlier, while the draw-down will not take place 
before January 1996.
  So a pension fund that was in very healthy condition in December 
1994, but which had suffered financial losses, or significantly 
increased claims for pensions--which happens when you force workers 
into early retirement--could be reduced significantly overnight.
  The economically targeted investments that were the subject of such 
dire predictions by my friends on the other side of the aisle benefit 
all America--through job creation, new housing, and rebuilt 
infrastructure.

[[Page E1997]]

  These are investments that produce income, which accrues to the 
benefit of the participants.
  They are made from within the plan and the investment stays with the 
plan.
  Mr. Stark's bill would allow funds to be taken from the plan--without 
notice.
  The sole beneficiaries of this pension grab are the corporate moguls 
who fund the PAC's led by the Republican leadership.
  So, retirees and pensioners, hold on to your wallets--the corporate 
raiders--the Willie Suttons in Gucci loafers--are headed your way and 
they have Armey's army leading the charge.
  This is bad tax and pension policy and should be stopped.

                          ____________________