[Congressional Record Volume 141, Number 175 (Tuesday, November 7, 1995)]
[House]
[Pages H11811-H11813]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 BUDGET PLACES WORKER PENSIONS AT RISK

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 
12, 1995, the gentleman from North Dakota [Mr. Pomeroy] is recognized 
for 60 minutes as the designee of the minority leader.
  Mr. POMEROY. Mr. Speaker, in the course of my time this evening, and 
I am not going to use the entire 60 minutes, I will be discussing the 
issue in the budget that places at risk worker pensions. I will be 
discussing that in some detail.
  Before beginning that topic, I want to say a couple of things. First, 
I would 

[[Page H 11812]]
commend my colleague. I thought the poetry which he professes to have 
authored was excellent. Very, very distinct and captures, I think, a 
lot of the emotions many of us have around the Lebanon tragedy.
  Second, I would also express my deep feelings of sadness about the 
death of Yitzhak Rabin. I have, as a second term Member of this 
chamber, heard the presentations of many world leaders from the podium 
here. No one has so impressed me as Yitzhak Rabin when he spoke about 
the long march toward peace.
  He had committed his life for his country, he had been his country's 
leading warrior, and now he felt the moment was right for peace. The 
sheer courage and moral authority he brought to the leadership of his 
country in trying to react and trying to result in peace was really 
overpowering. He could convey it personally and he could even convey it 
through the television, for those of us that watched him in that forum 
as well.
  Mr. Speaker, his loss is a real tragedy to the world.
  Now, on to the pension issue.
  One of the proposals that concerns me the most, Mr. Speaker, in a 
budget reconciliation act that is full of proposals that concern me, is 
a plan that would allow the withdrawal of pension funds across this 
country of $40 billion. I will be discussing this plan over the next 7, 
8, 9, maybe 10 minutes. I have an hour. I invite any Member of this 
chamber, any Member of the House of Representatives that favors this 
proposal, to join me on the House floor. Because I would be very happy 
to debate it in its technical dimension or in its public policy 
dimension.
  So if Members are watching this presentation, I would urge them to 
come to the floor and try to make their case. I do not think there is 
much of a case to be made for a proposal that would jeopardize workers' 
pensions to the tune of $40 billion across this country.

  Mr. Speaker, the issue, as I see it, is should protections that 
presently exist within the law, protecting solvency of pension 
programs, be maintained. The House budget has proposed eliminating the 
excise tax that prevents the withdrawal of pension funds exceeding 125 
percent of termination liability. They would eliminate the excise tax 
altogether until July 1 of 1996 and then impose a 6.5-percent tax 
thereafter.
  The process leading up to the inclusion of this provision in the 
House budget is, in my opinion, truly startling, even for a Congress 
that is full of startling shortcuts. In process, this one takes the 
cake. Forty billion dollars in workers' pension funds placed at risk 
for a proposal that did not have a single hearing. No hearing. It was 
placed in the Budget Reconciliation Act in the context of a Committee 
on Ways and Means markup. They eliminated the solvency protections, 
allowed corporations to grab those excess funds, for any purpose, 
notwithstanding the fact that there might be a resulting threat to 
solvency. So much as a 1 percent interest downturn would take these 125 
percent of termination liability plans and put them under water. 
Notwithstanding that risk, no hearings.
  Mr. Speaker, when one of the Members offered an amendment that said, 
well, at least notify the workers that we are going to take their 
pension funds, that amendment was also defeated. So we have no hearing, 
no opportunity for public input, the defeat of a provision that would 
have allowed for at least worker notification if their pension fund is 
robbed. Then some of us, because of the magnitude of this proposal, and 
let me tell my colleagues that $40 billion places at risk the pensions 
of millions of workers, and because of that we sought a rule. We sought 
a rule that would allow an amendment. Straight-up vote. We think this 
is a horrible idea, let us air it out on the floor of the House 
straight up or down. Give us a vote.
  We were denied the vote. The Committee on Rules did not allow us to 
offer an amendment striking this provision out because they wanted it 
sewn tightly into that huge Budget Reconciliation Act. They wanted to 
pass it in the sheer weight of this many hundreds of pages of 
proposals.
  I ask myself, Mr. Speaker, why in the world would they put worker 
pension funds at issue? We recognize as a country we have a savings 
crisis. People are not saving enough for their own pensions. In fact, 
this is the very budget that takes a run at Medicare, reduces what 
people will have under Medicare in the future. So why in the world, if 
we are going to reduce things like Medicare, which are public programs 
helping people in their retirement, why would we put at risk their 
private pension funds?
  The answer is one of two. First, let me give you the budgetary answer 
they have floated. If $40 billion comes out of pension funds, the U.S. 
Treasury collects a tax on it. It adds about $9 billion to the pension 
budget picture in the short run. It might strike the American people as 
more than a little curious that they would jeopardize long-term worker 
pension needs for a short-term hit to the budget, but that seems to be 
the gamesmanship underlying this proposal.
  Maybe there is another answer. The other thing that I can think of is 
that somebody has some powerful friends, and that somebody, corporation 
somewhere, wants to get at their pension kitty, and they have convinced 
this Congress, the Committee on Ways and Means and congressional 
leadership, to allow them to get at those pension funds because they 
want them.

  It has to be one of two, a short-term budget gimmick or unbelievable 
favors for special friends. In any event, it deserves more debate.
  Mr. Speaker, I want to talk a couple of minutes about the history of 
this. Having been an insurance commissioner during the eighties, I was 
responsible for regulating the solvency of insurance companies. As I 
did that, I also watched carefully what was happening to the solvency 
of pension plans, and what I saw I did not like; because in the go-go 
eighties, the mentalities of corporate takeovers, we began to see a run 
on corporate pensions.
  Often predators, trying to buy in a hostile buyout situation, a 
corporation would use the workers' own pension funds to finance the 
buyout. The great irony for workers is that their retirement savings, 
the pension fund, would actually be used to finance the hostile 
takeover that resulted in their loss of jobs. When the takeover artists 
enacted their downsizing and their cutbacks, their own pension funds 
financed the hostile takeover resulting in their loss of a job. Can you 
imagine anything worse?
  Over the 1980s, Mr. Speaker, we began to see acceleration in the 
tendency of money to flow from pensions. In 1982, $44 million. In 1983, 
you can see the amounts accelerating, until the total tally of money 
that flew out of pensions in the 1980s was estimated at $20 billion. 
Twenty billion dollars. And I will tell the American people, Mr. 
Speaker, that some of the pension funds that experienced those raids 
never came back, and some of the employees covered by those pensions 
did not receive what was owed to them in retirement savings. We can see 
the dramatically accelerating raid on pensions.
  To deal with this situation, past Congresses, operating on a 
bipartisan basis, because they understood that this country has an 
interest in having people have healthy pension funds, on three separate 
occasions enacted restrictions on people's ability to pull money out of 
their pension funds intended for their workers. First, they enacted an 
excise tax that was going to slow that up. They enacted a 15 percent 
excise tax to slow down the growth.
  That was not enough, and, as we can see on this chart, money 
continued to flow out. So they added to that the penalty for 
withdrawing from the pension funds and the amounts slowed, and the 
amount virtually stopped at the present protection, 50 percent excise 
tax on the withdrawal of the excess funds in pension funds. That left, 
as I mentioned earlier, a total of $20 billion out of those funds. 
Compare that to the $40 billion projected under the plan to come out if 
the protections are removed as proposed in the House-passed budget.

  Now, the resulting exposure if pension plans start going bust all 
over the country, because people have pulled out all this $40 billion, 
hits in two ways. First of all, it hits the worker that does not get 
their full benefits because the pension plan is under water; second, it 
hits taxpayers. We all have a 

[[Page H 11813]]
stake in this because the pension programs are guaranteed by an 
insurance program ultimately funded by taxpayers. Guaranteed by 
taxpayers kind of like the savings and loan insurance deal that cost 
taxpayers billions. This is insured by the Pension Benefit Guaranty 
Corporation. The PBGC.
  So, ultimately, workers get less on their pensions and taxpayers are 
asked to pick up the difference. Tremendous future liability exposure 
to taxpayers under this proposal. That is why, Mr. Speaker, when I 
first saw the proposal I asked the Pension Benefit Guaranty people what 
they thought of it. Their response was unequivocal. At the PBGC they 
believe this proposal places distinctly at risk the pensions of 
millions of workers across the country.
  They have done various studies that show that plans which are healthy 
today would, if they drew down to the limit allowed in the budget, be 
in serious financial shape in the future.

                              {time}  1930

  This thing has got to be stopped, and I will tell my colleagues my 
deep concern as we go into conference committee in the budget. It was 
initially proposed in the Senate as well. Now, the Senate can do 
something that we cannot in the House. They can have straight-up votes 
on whether this is a good proposal that ought to move forward. In 
response to the amendment offered in the Senate that we were precluded, 
prevented from offering in the House, the Senators voted 95 to 4 to 
take this out of their proposal.
  It is still in the House version, and I have every reason to believe 
that there is very strong feeling in the House for the passage of this 
particular proposal. They will try and blow it through in conference 
committee and tuck it into the folds of this massive Budget 
Reconciliation Act. And so the time for us, Members of Congress, who 
have a concern about this raid on workers' pensions is now. We must let 
the conferees on the budget know that it is not acceptable to place 
employees' pensions at risk in this fashion.
  I would hope that we would be joined in this effort by workers across 
the country whose future retirement security depends on the solvency of 
their pension funds. I would like these workers across the country to 
write to their Congressmen and let them know what they think of a 
proposal that would allow $40 billion to flow out of that pension fund. 
Those workers should know, as they write to their Congressman, that if 
their Congressman happens to be a Republican Member of this body, he or 
she has already voted for this pension raid. It is not too late to 
correct this mistake, but we better get after it, every Republican 
member having voted for this raid on pension funds.
  It is unacceptable, and although I have issued an invitation to any 
Member who cared to come down and debate the other side to supply to us 
how in the world they would allow a worker pension program to be raided 
to the tune of $40 billion, what was their motive in doing it, no one 
has joined me in the well or in the Chamber to conduct that kind of 
debate.
  Mr. Speaker, I let that challenge stand, and I will be back this week 
on other special order presentations fully prepared to debate with all 
comers this pension issue. It is a ripoff for working men and women, 
make no mistake about it, and will happen in one of three ways. 
Predator companies that want to take over a corporation will assess how 
fat their pension fund is, how secure their workers' retirement is, and 
they will base their takeover on whether they can bleed out pension 
funds to finance the takeover. We have seen it in the eighties, and we 
are going to see it in the nineties under this proposal.
  Second scenario, a corporation that cares a lot about the future 
retirement of its workers that has really tried to prudently manage 
their pension plan for solvency, that understands that they succeed as 
a corporation only because of the work of their workers and wants to be 
steadfast in their commitment to their retirement, will have to look 
again at their pension fund because they will know that the predators 
out there, the ones that I described under the first scenario, are 
taking a look at whether they can take over this corporation and use 
the workers' pensions to pay for it. Not only the predators will come 
after the pension funds, but even excellent corporations that fear 
takeover are going to have to look at whether they need to draw down in 
the pension fund, place the workers' pension funds at risk to avoid a 
hostile takeover.
  There is a third scenario, one that I used to watch as insurance 
commissioner. This is the struggling corporation, a corporation that is 
being badly managed, needs money, and cannot quite function in terms of 
meeting operating costs based on revenues. They have a couple of 
options. They can go to a bank, they can try and raise money privately, 
stock offerings and the like, but either of those prospects bring 
questions. How come you are being managed at a cash-flow loss? Why are 
you not doing more to improve your efficiency and productivity?
  Those are questions that go right to the caliber of the leadership of 
that corporation. Maybe they do not want those questions asked. Maybe 
the CEO's know they are not going to pass muster. It is real easy to 
dip in the workers' pension fund and take a little out of the pension 
kitty to fund cash flow. If they qualify on the reserves, no one is 
going to look.
  I saw this a little bit when I was insurance commissioner. The first 
indication of an insurance company heading into insolvency was that 
they would underfund their future liabilities. They would underfund the 
amount they are expected to pay in the future.
  That was a way of reducing the amount they were committing to the 
future and maximizing what they had available for cash flow, even 
though that was an incompetent management team that should have been 
replaced. Well, we are going to see it again. Incompetently run 
corporations are going to steal from their workers' pension cash kitty, 
forestalling the day of reckoning that faces that corporation and 
jeopardizing the solvency of the workers' pension fund while they are 
at it.

  Any way you slice it, these are unacceptable outcomes for our 
workers. It is unacceptable that Members would propose a $40 billion 
hit on the private pension funds of our workers and try and justify it. 
This is a case of where the Republican agenda has gone way too far. 
This is a case where I cannot understand for the life of me, and I try 
to be a bipartisan Member of this Chamber, I think we need more of that 
in the country, not less, but I cannot understand why they would walk 
lockstep on a proposal that so brazenly assaulted the sanctity of 
private pension funds necessary for the retirement obligations of their 
workers.
  We have got to stop this proposal, and that is why again in closing I 
would urge every Member of Congress to write, to contact, to call the 
House of Representatives in the budget conference on this issue. I 
would hope that we would be joined in this effort by workers across the 
country to contact their Member of Congress and say, ``Enough. Enough 
foolishness out of Washington. Do not place our pension funds at 
risk.''

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