[Congressional Record Volume 141, Number 176 (Wednesday, November 8, 1995)]
[House]
[Pages H11915-H11923]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 PROVISION IN BUDGET RECONCILIATION BILL ALLOWS CORPORATIONS TO REMOVE 
                          EXCESS PENSION FUNDS

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Massachusetts [Mr. Neal] is recognized for 5 minutes.
  Mr. NEAL of Massachusetts. Mr. Speaker, we are here tonight to 
discuss a provision that was included in budget reconciliation. This 
provision would allow corporations to remove excess funds from 
overfunded pension plans for any reason. There is only one way to 
describe this provision and that is the raiding of pension plans.
  Ten years ago we were faced with a similar situation. Let me read a 
quote from the Nov. 3, 1985 edition of the New York Times. The article 
was entitled ``Raking in Billions from Company Pension Plan.''

       At an increasing pace, some of the most familiar names 
     incorporate . . . have already withdrawn or are trying to 
     withdraw, $8 billion in surplus pension money. They are 
     diverting this money to other corporate use, such as take 
     over financing and capital investments and offering their 
     employees substitute pension plans . . . Workers across the 
     country are growing increasingly concerned that the stream of 
     retirement income generated under the present pension system 
     might disappear by the time they retire . . . Some blue-chip 
     companies have been accused of cynically using pension funds 
     bank accounts and tax exempt savings account.

  It is almost eerie how this quote from 10 years ago applies today. 
This quote could have been in today's New York Times.
  During the 1980's, approximately $20 billion in pension funds were 
drained by companies. Congress acted responsibly and passed legislation 
to protect pensions.
  The pension provisions in the House budget would undo all the good 
Congress had done in one fell swoop. It has been estimated that this 
provision could result in $40 billion leaving pension funds.
  Once again corporations are looking to take money from pension plans 
to use for their own whims. We cannot allow pension funds to be used as 
tax free corporate checking accounts.
  I have been reviewing the newspaper clippings on this issue and all 
across the country it is perceived as a bad idea. I want to share with 
you some of these headlines.
  ``Leave Those Pension Funds Alone'' Business Week October 23, 1995.
  ``The GOP Had Better Get Business Off The Dole, Too'' Business Week 
October 16, 1995.
  ``Pension Pirates'' New York Times, October 27, 1995. 

[[Page H 11916]]

  ``The Great Pension Fund Raid, Part II'' Los Angeles Times, October 
17, 1995.
  ``An Unconscionable Raid on Pensions'' Chicago Tribune, October 2, 
1995.
  ``Keep Paws Off Pension Fund Assets'' Chicago Tribune, September 25, 
1995.
  ``The New Tax-Free Corporate Checking Account'' Newsday, September 
21, 1995.
  ``Cut Now, Pay Later'' Plain Dealer, Cleveland Ohio, October 3, 1995.
  ``Protect Pension Fund Assets'' Sunday Patriot, Harrisburg, PA, 
October 1, 1995.
  I could go on and on but I think I have made my point. Congress 
should protect pension plans. The Senate has heard this message. The 
Senate voted overwhelmingly by a vote of 94 to 5 to delete their more 
restrictive corporate reversion provision.
  Mr. Speaker, why has the House not yet heard this message? The 
headlines have made it clear. This provisions is an unconscionable 
provision.
  Why is this provision needed? The House budget provides a huge tax 
cut to the wealthy and tax benefit to corporations at the expense of 
the middle class.
  Our No. 1 economic problem is our low national savings rate. We have 
to encourage individuals to save for retirement. This provision does 
the opposite.
  One of the main reasons for the Republican tax reform proposals is to 
increase the national savings rate. Our decline in savings can be 
attributed to declining private-sector contributions to employee 
pension plans. The provision in the budget is contradictory. This 
provision will allow corporations to immediately suck money out of 
pension funds.
  The proponents of this provision argue this provision will free up 
money and put it to work for job creation. An analysis done by the 
General Accounting Office [GAO] shows that most pension money is 
invested such as stocks and bonds that yield a financial return and 
provide capital to other companies.
  Plan fiduciaries are required by law to invest plan assets for the 
exclusive benefit of participants and to seek the highest rate of 
return for a given level of risk. The provision in budget regulation 
has no such safeguard.
  I served on the Banking Committee during the S&L crisis and this is 
the ghost of the S&L crisis. We cannot afford to put the Pension 
Benefit Guaranty Corporation [PBGC] at risk. We cannot afford a 
taxpayer bailout of the PBGC.
  I cannot think of one logical reason to include this provision in 
reconciliation. We cannot have a provision that is bad retirement 
policy. This provision does not belong in budget reconciliation. We 
have to protect the pensions of hard working Americans. We cannot let 
corporations siphon pension funds.
  I have with me several editorials, letters to the editor, and 
articles about the corporate pension reversion which I will place in 
the Record.
  The information referred to is as follows:

               [From the Arizona Republic, Nov. 1, 1995]

         Proposal Benefits IRS, Wall Street, Not Pension Plans

       No better time than right now for pension-dependent 
     retirees to contact Senators McCain and Kyl about a House-
     passed measure that would permit employers to withdraw 
     ``excess'' assets from pension plans. The measure is prompted 
     by the taxes that will be due on the monies withdrawn from 
     pension plans by employers encouraged to do so by the 
     prospect of plump after-tax windfalls to strengthen their 
     balance sheets.
       This revenue-raising idea starts with today's high-flying 
     financial markets: plan asset valuations are looking fatter 
     than needed to meet future benefit obligations. This, 
     however, assumes that the stock market will continue to fly 
     high. Returning today's paper-value cushion to employers 
     transfers the risk of tomorrow's market-value loss to 
     pensioners.
       Botton-line-driven corporate managers will be hard-pressed 
     not to regard an immediate balance-sheet windfall as more 
     important than a potential pension shortfall. It is naive to 
     think that these decision makers, pressured by the demands 
     and expectations of Wall Street, are likely to forego a 
     windfall in deference to the best interests of a constituency 
     of powerless retirees, when management can order up from its 
     CFOs conveniently rosy, asset-value prognostications to 
     justify its actions.
       Dependent as I am on my pension, I am loath to accept the 
     risk of this high-flying market crashing and burning just so 
     my former employer can enjoy that one-shot balance-sheet 
     windfall.
       The (transitory) budget benefits gained through taxation of 
     pension-asset drawdowns is an incipient threat to the 
     financially weak Pension Benefit Guaranty Corporation, a 
     federal insurance fund that protects pensioners from plan 
     failures.
       This ill-advised House measure--as short-sighted as all the 
     past careless measures that have placed the Medicare and 
     Social Security trust funds in jeopardy today--awaits Senate 
     approval. Now is the time to write.--Arnold E. Buchman, 
     Scottsdale.
                                                                    ____


                [From the New York Times, Oct. 19, 1995]

                 Don't Let Companies Skim Pension Funds

       To the Editor:
       ``A Hard-Hearted Tax Bill'' (editorial, Oct. 12) neglects 
     to mention one provision of the Republican tax bill that 
     needs to be eliminated or modified: the proposal that makes 
     it easy for companies to take ``excess'' assets out of 
     employee pension plans, with little or no penalty, and to use 
     those funds for nonpension purposes.
       The Joint Committee on Taxation has estimated that the 
     proposal would cause $40 billion of assets to be taken out of 
     plans over the next five years. This could be disastrous for 
     both taxpayers and retirees with private pensions.
       Taxpayers would be at risk because a taxpayer bailout of 
     underfunded pension plans would be more likely in an economic 
     downturn. Retirees would be hurt because they would be less 
     likely to receive cost-of-living increases in the future and 
     because they would experience less security in their basic 
     pensions.
       The Pension Benefit Guaranty Corporation has indicated in a 
     study the extent to which a plan that is overfunded can 
     quickly become underfunded. A plan that is 125 percent funded 
     could become underfunded with a 10 percent drop in the stock 
     market, coupled with a 1 percent drop in interest rates.
       Giving companies the right to extract $40 billion would 
     only exacerbate that situation.
       The main justification of House Republicans for this piece 
     of corporate welfare is that it would raise an estimated $10 
     billion or more in corporate income tax revenues over seven 
     years, thus helping to reduce the deficit. This is false 
     economy, since it raises the possibility of another savings 
     and loan association-type bailout and of retirees losing all 
     or part of the pension they have earned.
       Congress should either eliminate the provision from the tax 
     bill, or modify it to allow employees and retirees to share a 
     portion of whatever ``excess'' assets a company chooses to 
     take out of its pension plan.--Charles Londa, Houston, Oct. 
     12, 1995.
                                                                    ____


              [From the Valley Independent, Oct. 6, 1995]

                Tell Congress to Let Our Pensions Alone

       The outcry from the public should be loud enough to rattle 
     the halls of the Capitol. The message should be don't mess 
     with our pensions.
       The House Ways and Means Committee has approved a measure 
     that could endanger the retirement security of 13 million 
     Americans.
       At least that's the claim of three Cabinet members--Labor 
     Secretary Robert Reich, Treasury Secretary Robert Rubin and 
     Commerce Secretary Ronald Brown, who serve on the board 
     overseeing the federal Pension Benefit Guaranty Corp.
       By permitting companies to make withdrawals from pension 
     plans at any time and for any purpose, Republicans expect the 
     plan to raise $9.5 billion for the government because 
     companies would pay corporate income taxes on the 
     withdrawals. Currently, withdrawals are permitted only if the 
     money is used for retirees' health benefits. The proposal is 
     part of a bill intended to reduce the budget deficit by $38 
     billion over seven years.
       The Cabinet trio say this measure would trigger the 
     withdrawal of up to $40 billion from pension plans in the 
     next five years--twice what was removed by companies during 
     the corporate takeover frenzy of the 1980s.
       ``We are going to see raids on pension assets that will 
     make the train robberies during the days of Jesse James pale 
     in comparison,'' Reich said.
       Ways and Means Chairman Bill Archer, R-Texas, calls these 
     charges by Cabinet members a politically motivated attempt to 
     scare people and claims the measure will give workers more 
     retirement protection by encouraging employers to fund 
     pensions at a higher level. He said the legislation would 
     require corporations making withdrawals to leave an ample 
     cushion of 25 percent more than needed to meet current 
     liabilities.
       But according to an analysis by the pension benefit agency, 
     20 to 50 plans on an underfunded watch list suffered 
     withdrawals in the 1980s of what were then considered excess 
     assets.
       Also, the agency said an examination of 10 large plans 
     shows the Ways and Means limit on withdrawals isn't enough to 
     protect pension plans if the companies go bankrupt and their 
     pension plans are terminated. Such plans would be left with 
     less than 90 percent of the money needed to meet its 
     obligations, the agency said.
       Referring to the pension raids in the '80s, Brown said: 
     ``We know what happened when the barn door was open. We 
     closed the barn door. This would reopen the barn door. It's 
     illogical.''
       More than illogical, it is a violation of trust--the 
     American workers' trust that the money for their pension will 
     be there when they are eligible to retire.
       Along with attempts to cut Social Security and Medicare, 
     this threatens the ability of workers to afford retirement in 
     the near future. If people reaching retirement age must keep 
     working, this means less jobs will 

[[Page H 11917]]
     be available for the young. This is what's really illogical. It will be 
     just another reason unemployment and welfare rolls will rise.
       Don't let that barn door be reopened. Protect your future 
     by letting your congressman know how you feel.
       You can write Rep. Frank Mascara, D-Charleroi, at 1531 
     Longworth House Office Building, Washington, D.C., 20515.
                                                                    ____


                  [From the USA Today, Sept. 22, 1995]

   Today's Debate: Pension Protection--Attempt To Trim Deficit Puts 
                           Pensions in Danger

       Is your company's pension plan solid? If so, it may soon be 
     ripe for picking--by your boss.
       A proposal moving toward passage in Congress would allow 
     corporate raids on business-financed pension funds. At risk--
     $80 billion in savings in those funds plus billions more in 
     taxpayers' money because the funds are federally insured.
       The technicalities of what House Republican tax-writers are 
     doing sound safe enough. New rules would merely eliminate a 
     50% tax penalty on money withdrawn from pension accounts in 
     excess of 125% of that needed to meet current liabilities.
       Only the 125% cushion is bogus.
       A study by the Pension Benefit Guarantee Corp. found that 
     even such supposedly healthy funds, if terminated suddenly 
     by, say, a business bankruptcy, could pay less than 90% of 
     promised retiree benefits.
       On top of which, even the surplus can quickly disappear if 
     stocks go south or interest rates decline.
       That's what's happened to a lot of pension plans that 
     companies raided for their surpluses in the 1980s. For 
     example, ASI Holding took $120 million from a supposedly 
     overfunded plan in 1988. It's now $86 million underfunded. 
     Enron Corp. took out $232 million in 1986 and is now $82 
     million underfunded. If either company goes out of business, 
     taxpayers will pick up the bill.
       Indeed, taxpayers are now liable for $71 billion from such 
     underfunded plans. A bear stock market, and the GOP proposal 
     could up that by $80 billion. And along with taxpayers, a lot 
     of once comfortable pensioners will be at risk, too. Federal 
     insurance only picks up $30,000 in annual benefits.
       So, why are Republicans racing to take this gamble? To 
     raise money to pay off hundreds of billions in tax breaks and 
     yet balance the budget by 2002. Funds withdrawn from pensions 
     are subject to corporate taxes. Authors estimate they'll 
     raise $10.5 billion from them.
       That misses the whole point of deficit cutting--to stop the 
     government from draining away private savings needed for 
     investment and growth. For every $1 this plan cuts from the 
     deficit, $4 in pension savings and potential investment go 
     out the window.
       Still, such pension raids for deficit cutting aren't new. 
     Reforms in 1982, 1986, 1987, 1993 and 1994 put limits on 
     pension contributions, and even penalized companies for 
     overfunding their plans, all in the name of deficit-
     reduction. The result: a steady decline in national savings--
     the key to growth--and a rise in underfunding of pension 
     plans.
       Now, the nation has little savings left. Congress should 
     try to reverse the process, not exacerbate it.
                                                                    ____


                  [From Business Week, Oct. 23, 1995]

                    Leave Those Pension Funds Alone

       Who ``owns'' the $100 billion in surplus money in Corporate 
     America's pension plans, the retirees or the companies? 
     Either way, Congress' proposal to allow corporations to tap 
     surplus pension funds is a bad idea. It's a short-term policy 
     that will generate quick tax bucks to help balance the budget 
     at the expense of overall savings in the nation. It may be 
     good for companies, it may not even hurt retirees, but it is 
     bad government policy.
       Virtually all U.S. retirement plans are shaped by the 
     government's need for revenue rather than the family's or the 
     economy's need for savings. Employee contributions to 401(k) 
     plans are capped by the government at $9,240. This year, 
     Congress actually cut the 401(k) contribution by not 
     compensating for inflation. It needed more tax income to make 
     up for a cut in revenues that occurred when trade tariffs 
     were reduced. That's ridiculous, given that if people with 
     401(k)s could sock away more money for retirement, more 
     capital would be available for economic growth and jobs.
       The limits on individual retirement accounts are even 
     tighter--$2,000 if you are not in another pension plan. Self-
     employed people with Keoghs get a much better deal: They can 
     save up to $30,000 or 15% of their income annually tax-free. 
     If entrepreneur can save that much for the future, why not 
     corporate employees? Washington should be encouraging all to 
     put more money into pension plans, not less.
                                                                    ____


                  [From Business Week, Oct. 16. 1995]

           The GOP Had Better Get Business Off the Dole, Too

                           (By Mike McNamee)

       Christmas came early on K Street. Washington's business 
     lobbyists awoke one morning in late September to find a $40 
     billion present from Ways and Means Chairman Bill Archer (R-
     Tex.): a proposal to let companies reclaim and spend massive 
     assets locked away in overfunded pension plans. The loophole 
     was designed mainly to help budget-cutting Republicans, who 
     will garner $10.5 billion in taxes if companies pull out $40 
     billion in assets, as expected. But Archer's gift was a big 
     hit in Corporate America--and like the very best presents, it 
     was pretty much a surprise. ``We didn't ask for it,'' says a 
     pension lobbyist, ``but you can bet we're defending it now.''
       So much for ending ``corporate welfare'' as we know it. 
     Early this year, Republican radicals swore they would erase 
     the GOP's image as the Skybox Party. House Budget Chairman 
     John R. Kasich (R-Ohio) targeted $30 billion in special 
     corporate tax breaks for elimination. Strategists warned of a 
     public-relations disaster if Republicans slashed the social 
     safety net while leaving a cocoon of $86 billion in subsidies 
     and breaks for Big Business.


                              unchallenged

       Did the majority of Republicans get the message? No. Some 
     have learned to talk the talk: Archer, for example, portrays 
     his pension-raid plan as the centerpiece of ``corporate tax 
     reform.'' But in reality, ``corporate welfare continues 
     unchallenged,'' complains former Bush aide James P. 
     Pinkerton. Even the GOP's struggle to carve $1 trillion from 
     the budget over the next seven years can't shake its 
     reflexive urge to shower business with federal largesse. If 
     they can't repress that instinct, Republicans will never 
     convince voters that they have been reborn as the champions 
     of the middle class.
       Most of the biggest corporate breaks were never in peril. 
     Oil drillers and timber companies didn't lose any sleep over 
     their loopholes--not with Texan Archer and, until recently, 
     Oregon Senator Bob Packwood in charge of tax policy. 
     Republicans who had long denounced the ``socialism'' of the 
     Tennessee Valley and Bonneville Power authorities ``got real 
     quiet when their party started winning seats in the 
     Northwest, the land of cheap electricity,'' says Robert J. 
     Shapiro of the Progressive Policy Institute, a Democratic 
     think tank. Big exporters will continue to enjoy sales help 
     from the Export-Import Bank and the Agriculture Dept.'s 
     marketing-promotion programs.
       Even where budget-cutters did propose small nicks in 
     corporate welfare, lobbyists have come roaring back. Iowa 
     Republicans reminded House Speaker Newt Gingrich (R-Ga.) that 
     they're hosting the first event of the 1996 primary season--
     and persuaded him to eliminate the Ways & Means panel's cap 
     on tax breaks for ethanol, a boon to corn farmers and 
     agribusiness giant Archer-Daniels-Midland Co. Home-state 
     shipping interests prevailed over ideological purity for 
     Senate Majority Whip Trent Lott (R-Miss.), who forced $46 
     million in maritime subsidies back into the budget.
       Budget pressures ultimately may doom some subsidies. The 
     imperative to cut $13 billion from farm programs, for 
     example, may guarantee that something like the Freedom to 
     Farm Act--a 7-year reduction in price supports--will prevail. 
     The pork that's packed into the Pentagon's appropriation will 
     certainly be trimmed in hard negotiations between Capitol 
     Hill and the White House. And tax breaks for pharmaceuticals 
     markers' Puerto Rican plants, long under assault, may slowly 
     wither away.
       That's a start--but it's not enough. A GOP that believes 
     social welfare breeds personal dependency can't go on 
     pretending that corporate welfare builds a strong economy. 
     The party that's bold enough to reform health care for the 
     elderly ought to show the same fortitude when tackling oil 
     drillers and airplane manufacturers. If Republicans can't 
     wake up to the glaring disparity in their positions, they can 
     be sure the voters will.
                                                                    ____


                [From the New York Times, Oct. 27, 1995]

                            Pension Pirates

                          By James H. Smalhout

       Congress is playing politics with pensions and ignoring the 
     financial risk to workers and taxpayers. A proposal in the 
     House budget reconciliation bill, passed yesterday, would let 
     any company with a strong pension fund take money out of it 
     for any reason as long as the plan maintained a cushion of 25 
     percent more than the cost of paying current benefits. The 
     Senate is debating a similar proposal.
       Letting companies dip freely into pension funds is a bad 
     idea. Federal pension laws understate the costs of keeping 
     plans afloat, so even a 50 percent cushion might not be 
     enough to withstand volatility. And the country already has a 
     serious pension problem: about 25 percent of private plans 
     together come up short of their current obligations by $71 
     billion.
       Still, this flawed proposal, written by Bill Archer, 
     chairman of the Ways and Means Committee, responds to a 
     serious concern. Some companies with flush pension plans have 
     become targets for hostile takeovers. Predators want to grab 
     surplus pension money to shore up their own funds. This is 
     one reason why WHX, a West Virginia steelmaker with a weak 
     plan, has been trying to take over Teledyne, which has a $1 
     billion pension surplus.
       The natural defense for target companies is to remove the 
     attractive nuisance of surplus pension money. So employers 
     with good plans are under pressure to take money out of them 
     to survive. This was easy in the 1980's, when companies could 
     simply terminate their plans and turn the liabilities over to 
     insurance companies to pay the benefits. But these deals were 
     often risky, so Congress set excise taxes as high as 50 
     percent, which have all but ended them. 

[[Page H 11918]]

       Companies can take money out of their plans to cover 
     retirees' health care premiums. But this provision has little 
     value unless a company has many retirees. Dynamic young firms 
     like Teledyne do not.
       Concern about the plight of takeover targets should not 
     move Congress to let these companies raid their pension funds 
     at will. The contributions of a worker and his company become 
     larger--and his benefits increase faster--the longer he stays 
     on the job. So it doesn't follow that a pension plan has a 
     healthy future just because it has a surplus today.
       The sensible approach is to require plans to maintain a 
     precautionary surplus. Without extra assets to protect 
     against volatility and rising costs, a plan is just a long-
     term Ponzi scheme like Social Security. And that's very risky 
     for taxpayers, who stand behind failing pension funds.
       Last year, Congress and the Clinton Administration ducked 
     the fundamental issue of how to provide workers with secure 
     pensions while protecting taxpayers. They raised taxes on 
     weak pension plans and passed slightly stricter financing 
     requirements. But these measures were hopelessly inadequate. 
     And by taxing companies with weak plans, they strengthened 
     the urge to merge that puts companies like Teledyne under 
     pressure from pension pirates.
       That is why Representative Archer is proposing to allow 
     companies to take extra pension money for any corporate 
     purpose. In his favor, the Government does not do a good job 
     of detecting which companies are strong enough to keep their 
     pension promises. But his legislation is unwise. No law 
     should let companies tap retirement money without recognizing 
     the long-term financial costs.
       There is a better way. Workers and taxpayers could be 
     protected by requiring companies to secure their pension 
     benefits with a guarantee from triple-A rated insurance 
     companies. This would keep companies like WHX from ending up 
     with weak plans. If the creditworthiness of the pension plan 
     and the company was so weak that private insurance couldn't 
     be obtained, benefits would be frozen. Companies in such 
     sorry shape have no business making false promises to their 
     workers.
       President Clinton has vowed to veto the budget package, and 
     the veto would likely be sustained. The House should use the 
     opportunity to make sure that companies keep their pension 
     plans in good shape, not to declare open season on workers 
     who have paid to have safe and secure pensions.
                                                                    ____


              [From the Los Angeles Times, Oct. 17, 1995]

                  The Great Pension Fund Raid, Part II

       Americans covered by pension plans with defined benefits 
     had better watch out for the frenzied congressional effort to 
     allow companies to divert money from these employee 
     retirement funds. Congressional Republicans are trying to 
     lift safeguards that were imposed in 1990 to prevent raids on 
     pension funds. Making it easier for some companies to 
     withdraw so-called excess assets could put these plans at 
     risk. This is one item in the huge tax package working its 
     way through Congress that should be abandoned.
       Under current law, companies may withdraw excess assets--
     defined as those exceeding 125% of the amount needed to meet 
     projected pension obligations--without penalty, but only if 
     the money is used for health benefits for retirees. For 
     withdrawals for other purposes, companies must pay tax 
     penalties of 25% to 50% as well as income taxes. Congress 
     imposed the penalties five years ago in response to corporate 
     raiders who took over companies in the 1980s and tapped 
     surplus pension funds, a move that left both retires and the 
     government at risk. About $20 billion was pulled out of the 
     private pension system then, according to the Pension Benefit 
     Guaranty Corp., the federal agency that insures defined-
     benefits pension funds.
       The House Ways and Means Committee has already cleared a 
     bill, sponsored by Bill Archer (R-Tex.), to allow firms to 
     withdraw funds for any purpose without notifying pension 
     participants. The withdrawals would be subject to an excise 
     tax of only 6.5% (in addition to income taxes). Any 
     withdrawals before next July 1, would escape the excise tax--
     an undesirable inducement to use surplus funds quickly. The 
     Senate Finance Committee is considering a similar measure.
       Proponents stress that under the change the government 
     stands to raise about $9.5 billion over seven years because 
     many more companies would tap pension money. But a 
     potentially negative effect of the legislation is that an 
     estimated $30 billion in pension funds could be withdrawn. 
     Raiding excess pension assets would be particularly tempting 
     to financially weak companies.
       Might current overfunded pension funds become underfunded? 
     Yes. After all, companies are never absolutely sure of how 
     much they will need to pay retirees in pension benefits. That 
     depends on how long retirees live and other variables, such 
     as interest rate fluctuations.
       For all these reasons, these changes in the use of excess 
     pension funds should be opposed. Pensions are a crucial 
     factor in the national savings rate, and financial saving is 
     something government policy should encourage, not discourage.
                                                                    ____


                [From the Chicago Tribune, Oct. 3, 1995]

                      Pension Proposal Aids Raids

                           (By Kathy Kristof)

       In a move that both startled and horrified pension 
     advocates, a key congressional committee passed a proposal 
     making it easier for some companies to raid their employee 
     pension plans.
       The provision is a key of a sweeping tax overhaul that 
     would save the government an estimated $30 billion over five 
     years. As a result, it has a good chance of passing into law, 
     despite the fact that everyone from the American Association 
     of Retired Persons to the AFL-CIO is fighting against the 
     pension provisions, Washington insiders say.
       ``This is going to make pension plans a tax-free checking 
     account for companies,'' says Neil Hennessy, deputy executive 
     director of the Pension Benefit Guaranty Corp. (PSGC), a 
     government agency that backs defined benefit pension plans. 
     ``Nobody anticipated that Congress would do this.''
       ``It's unbelievable,'' adds Cindy Hounsell, staff attorney 
     at the Pension Rights Center. ``It's a return to the 1960s.''
       What the provision would do is simple. It would drastically 
     reduce tax penalties for taking money out of an 
     ``overfunded'' pension, cutting the excise tax to 6.5 percent 
     from penalties that range from 20 to 50 percent today. 
     Indeed, it would actually give companies an incentive to raid 
     their pensions quickly--before July 1, 1996--by waiving all 
     tax penalties for taking surplus money out of pensions that 
     have more than 125 percent of the money needed to pay future 
     retiree benefits.
       Under the proposed rules, the government would still make 
     money if a company raided its pension, because any amount 
     ``distributed'' from a pension is considered taxable income. 
     Companies that raided their pensions before July 1 would pay 
     income tax, but no penalties on the amounts withdrawn.
       Currently, if companies take money out of a defined benefit 
     pension, they must pay income and excise taxes on the amount 
     withdrawn--similar to the taxes and penalties you would face 
     if you withdrew money early from an individual retirement 
     account. However, the corporate penalties are currently much 
     more severe, amounting to between 20 and 50 percent of the 
     withdrawn amount in addition to regular income taxes paid on 
     the money.
       In the end, a corporation that took money out of a pension 
     today would lose 80 to 85 percent of the withdrawn amount to 
     federal taxes, says Bruce Ashton, a Los Angeles-based pension 
     attorney.
       The high penalties were instituted in the late 1980s, after 
     a wave of corporate raiders took over companies, spent their 
     pension ``surpluses'' and ultimately left both retirees and 
     the government at risk. The government, in the form of the 
     Pension Benefit Guaranty Corp., insures defined benefit plans 
     to specified limits, essentially putting taxpayers on the 
     hook for any big losses to the pension system. However, some 
     retirees are also at risk because the government insurance 
     covers only up to set amounts--currently to about $2,574 in 
     monthly benefits. Those who were promised more could lose any 
     excess amounts in a pension plan failure.
       How can it be risky to withdraw money from a pension when 
     the company has more than 125 percent of the amount it needs 
     to pay future benefits?
       The tricky thing about pension surpluses--and shortages--is 
     they're all estimated. In reality, companies don't know 
     precisely how much they'll need to pay retiree pension 
     benefits. The real cost will depend on how long employees 
     live and collect monthly payments--and on how much the 
     company earns on its savings in the interim.
       The proposed law stipulates that companies that decided to 
     withdraw funds from an overfunded plan would not be required 
     to inform their workers, says Hennessy.
       How much damage could this do to the income of future 
     retirees?
       ``It's hard to judge,'' says Hennessy. ``It is very 
     difficult for consumers to stop a raid of their pension when 
     the law allows it. But most people are paid what they are 
     owed by their plan.''
       In fact, many believe the law has wings for one simple 
     reason. It could allow the government to immediately collect 
     billions in income taxes from companies that take money out 
     of the pension and declare it as income. At the same time, 
     the risks are hard to quantify, and the costs--anticipated in 
     future pension plan failures--aren't likely to hit for years, 
     probably long after today's congressional leaders are 
     retired.
                                                                    ____


                [From the Chicago Tribune, Oct. 2, 1995]

                   An Unconscionable Raid on Pensions

       Whenever the big fiscal squeeze is on in Washington--as it 
     is now--politicians of all stripes are tempted to dip into 
     money pots wherever they can find them.
       One of the most inviting stashes is the nearly $5 trillion 
     salted away in pension funds. Republicans on the House Ways 
     and Means Committee recently sanctioned a raid on corporate 
     pension funds as a way to raise new revenues and help them 
     balance the budget.
       Democrats blasted the tax-writing panel's action, 
     contending it would threaten workers' nest eggs and could 
     leave taxpayers with a sizable bill if any pension plans go 
     belly-up as a result.
       But with Congress cutting spending on social programs, the 
     Clinton administration has been pushing to let private 
     pension funds invest in low-income housing and other so-
     called economically targeted investments. While the White 
     House is technically correct that this doesn't constitute a 
     raid on pension 

[[Page H 11919]]
     funds, it's at least a thinly veiled sneak attack.
       The point is that both parties should keep their grubby 
     hands off pension-fund assets. Employers pay into retirement 
     funds, hoping they will grow enough to cover the payouts 
     promised to retirees. By law, fund managers should be 
     concerned solely with investing to increase benefits for plan 
     participants, and the money in a fund should be thought of as 
     belonging to the participants.
       House Republicans, however, decided to ease the rules so 
     employers could withdraw ``excess'' money from pension 
     funds--cash above future pension needs--and use it for 
     anything they want. They said the companies would invest it 
     in new plant and equipment and not jeopardize the funds 
     because they still would be required to have a 25 percent 
     cushion as insurance to meet future obligations.
       Even with the cushion, Democrats contend the drawdown of 
     assets will make some funds vulnerable to lower returns if 
     the economy and stock market sour. Then, the administration 
     argues, the government would have to come to the rescue of 
     underfunded pensions, with taxpayers footing the bill.
       Republicans would increase the odds for greater unfunded 
     pension liabilities and for some funds to go under. Why? 
     Because while the move would divert up to $40 billion from 
     the pension system, companies would have to pay income tax on 
     the money, raising nearly $10 billion over seven years.
       It's a terrible gamble at the wrong time. Many pension 
     funds already are underfunded. Workers aren't saving 
     adequately for retirement and, early in the next century, 
     Social Security will face serious financial woes. Republicans 
     and Democrats alike should keep their hands out of the 
     pension fund cookie jar.
                                                                    ____


               [From the Chicago Tribune, Sept. 25, 1995]

                   Keep Paws Off Pension Fund Assets

                           (By Bill Barnhart)

       Have you noticed? Squirrels are especially busy gathering 
     nuts as fall begins this year. That means a harsh winter lies 
     ahead, according to some nature lovers.
       Well-heeled financial backers of the current Republican 
     majority in Congress--perhaps sensing that the good days 
     won't last much longer for them, either--are busy grabbing 
     for everything they can get as fast as they can get it. Under 
     cover of the high-profile debates about budget deficits, 
     welfare reform and Medicare, they are stuffing their cheeks 
     with smaller morsels that don't get media attention.
       A few weeks ago legislation emerged to weaken the nation's 
     securities laws that protect small investors in favor of the 
     interests of the ``entrepreneur.'' (This Republican Congress 
     may be remembered best for giving entrepreneurship a bad 
     name.)
       The latest is a proposed raid on corporate pension funds, 
     which represent the storehouse of retirement savings for 
     millions of American workers. Instead of helping their 
     employees gather retirement nest eggs that will withstand the 
     vagaries of financial markets, certain employers have decided 
     they want free access to the so-called excess dollars in 
     company pension plans.
       Many employees these days aren't being covered by pension 
     plans at all, but are expected to sock it away themselves 
     through such tax-advantaged programs as 401(k) plans and 
     individual retirement accounts. A big worry is whether they 
     are saving enough.
       There is no provision in the rules for workers who have 
     been fortunate enough to see their 401(k) or IRA portfolio 
     value grow in the current bull market to declare an 
     ``excess'' and withdraw funds for a vacation without paying a 
     tax penalty.
       But that's exactly what certain employers pushing a bill 
     recently passed out of the House Ways and Means Committee 
     want to do with employee pension fund assets. Only instead of 
     a vacation, the fun and games could involve more ego-building 
     mergers and acquisitions by a handful of financiers who would 
     use pension fund assets to pay for their deals. It happened 
     in the 1980s, and it can happen again.
       ``We though we'd put an end to those things,'' said Martin 
     Slate, executive director of the Pension Benefit Guaranty 
     Corp., which has the unenviable task of making good when 
     employers skip out on their employee pension obligations.
       Employers pushing this measure say they want to use the 
     locked-up capital to grow and create jobs. That may be. But 
     companies such as Chrysler, with large unrestricted cash 
     amounts on their balance sheet often become sitting ducks for 
     hostile takeover artists. Unlocked pension fund assets on the 
     balance sheet are as inviting as cash to a raider. Certainly, 
     the employees would not get to vote on the use of their 
     ``excess'' pension funds.
       Slate's agency estimates that $30 billion to $40 billion in 
     pension assets would be raided if the provision now under 
     consideration passes. That's $30 billion to $40 billion less 
     of an already shrinking cushion of pension fund surplus. 
     Meanwhile, the level of unfunded pension liabilities has been 
     growing.
       A law enacted in 1990, largely in response to the raids on 
     pension funds during the previous decade, bans employers from 
     withdrawing the alleged excess employee pension funds, except 
     under limited circumstances to pay retiree health benefits.
       Some companies advocate a limited change in the law to 
     permit them to tap a conservatively derived surplus in their 
     employee pension funds to pay health care benefits for active 
     workers. That idea deserves consideration because it would 
     benefit employees. But to turn any amount of pension fund 
     assets into a company checking account for any purpose is 
     dangerous public policy.
       The ability and willingness of American workers to save 
     adequately for their retirement is a major concern these days 
     for individuals and the economy as a whole. Letting employers 
     raid their employees' storehouse is no answer to the problem. 
     The fat-cat squirrels should stick to their own nests.
       Dumb question: Why doesn't the dividend yield figure relate 
     to the price of the stock, so that when the price per share 
     changes so does the yield statistics?
       It does, but sometimes the change goes unreported in 
     newspaper stock listings because of rounding. For example, a 
     stock with a $2.40 per share annual dividend selling at $60 
     would have a reported dividend yield of 4.0 percent in the 
     stock listings. If the stock price dropped to $59.125, the 
     yield would rise to 4.05 percent, which still would be 
     reported at 4.0 percent. If the stock price dropped to 
     $59.00, the yield would be 4.06 percent, rounded up to 4.1 
     percent in the listings.
       Recently, market commentators have noted that dividend 
     increases have not kept up with stock price increases. To the 
     extent that is true, the changes in reported dividend yields 
     will be less frequent because the dividend represents a 
     smaller part of the share price and the rounding problem 
     becomes more pronounced.
                                                                    ____


                [From the AARP Bulletin, November 1995]

                  Pension Forecast: New Raids Coming?

                           (By Robert Lewis)

       A debate that everybody thought was settled five years ago 
     over who owns pension assets--workers or employers--has 
     suddenly reignited.
       Touching off the controversy is a Republican plan in 
     Congress to allow corporations to withdraw reserve assets 
     from pension plans and use the funds for purposes other than 
     pensions.
       Under a provision included in a tax bill that recently 
     passed the House Ways and Means Committee, employers could 
     tap these assets just so long as they left a cushion of at 
     least 25 percent over what is needed to pay current pension 
     obligations.
       Rep. Bill Archer, R-Texas, chairman of the Ways and Means 
     Committee and author of the plan, said the ``pension 
     reversion'' provision would be good for corporations, and 
     also good for the overall economy.
       ``This will allow companies with excess money in their 
     pension plans to put that money to use,'' he said in a 
     prepared statement, ``to create new jobs, opening up 
     opportunities to expand the economy.''
       But critics see dangers for pension plans in the GOP 
     proposal. They argue that a 25 percent cushion is not enough 
     margin to prevent currently overfunded plans from becoming 
     underfunded should their assets decline during economic 
     downturns.
       The Pension Benefit Guaranty Corp. (PBGC), the federal 
     agency that insures pensions, calculates that a plan with a 
     25 percent cushion could become underfunded if the stock 
     market dropped 10 percent or interest rates fell two 
     percentage points.
       ``The [GOP plan] makes pensions vulnerable to stock market 
     downturns,'' says Karen Ferguson, of the Pension Rights 
     Center, a Washington advocacy group. ``It could place 
     pensions at risk should firms get into financial trouble.''
       Clinton administration officials attacked the proposal, 
     charging that it would allow companies to siphon up to $40 
     billion from pension plans and threaten the retirement 
     security of 11 million workers and 2 million retirees 
     enrolled in some 22,000 plans.
       If the plan become law, Labor Secretary Robert Reich told 
     reporters, ``We're going to see raids on pension assets that 
     will make the train robberies during the days of Jesse James 
     pale in comparison.''
       AARP officials also criticized the GOP plan, contending it 
     would ``bring back the large pension raids of the late 
     1980's, ``when employers diverted some $20 billion of pension 
     funds to other purposes. Much of the money was used to 
     finance corporate takeovers and leveraged buyouts.
       In 1990, the federal government sought to curb pension 
     reversions by making employers subject to a 50 percent excise 
     tax if they withdrew pension assets and terminated the fund, 
     or a 20 percent excise tax if they established a successor 
     plan. Firms pay federal income taxes on top of that.
       Archer's bill would repeal the excise tax for six months, 
     then reduce it to 6.5 percent through 2000. Congressional 
     analysts estimate companies, as a response to Archer's bill, 
     would pull $40 billion from pension funds.
       If they did, that would generate $10 billion in tax 
     revenue, experts figure, suggesting this may be the real 
     reason for the Archer proposal.
       But Labor Secretary Reich says such a gain may be illusory, 
     since the federal government insures the nation's 58,000 
     conventional company pensions covering 41 million workers.
       When plans fail the PBGC steps in and runs them, keeping 
     pensions flowing to beneficiaries. Although the PBGC is 
     financed by insurance premiums paid by corporate pension 
     sponsors, any shortfalls conceivably could end up being paid 
     by taxpayers.
       At the heart of the controversy is a question of who owns 
     the assets of pension funds.

[[Page H 11920]]

       Lynn Dudley of APPWP--The Benefits Association, which 
     represents large corporations, has no doubts about the 
     matter. ``Excess assets belong to the employer,'' she says.
       But pension advocates say the money is deferred 
     compensation and belongs to workers. Still other suggest the 
     money belongs right where it is--in the pension trust. 
     ``Employers simply should not be permitted to put workers' 
     pension-fund money at risk, as would happen with this 
     proposal,'' says AARP lobbyist David Certner.
                                                                    ____


               [From the Washington Post, Oct. 31, 1995]

                             Two Bad Ideas

       The enormous budget-balancing bills that the House and 
     Senate passed last week each contain some corporate tax 
     increases. Two in the House version of the bill are bad ideas 
     and ought to be dropped in the conference that now begins.
       One would make it easier for corporations to remove 
     supposedly excess funds from their pension reserves and use 
     the money for other purposes. Thought it would result in some 
     increased tax payments, it is less a tax increase than a 
     benefit that corporations actively sought--and that critics 
     say would leave the affected pension funds in weakened 
     condition.
       The other would phase out a low-income housing tax credit 
     meant to induce corporations to invest in such housing in 
     return for somewhat lower taxes. Again, it is hardly the 
     corporations that would be the primary losers were it to 
     disappear.
       Republicans have pointed to the corporate tax increases--
     they prefer to call them adjustments or reforms--as evidence 
     that theirs is an evenhanded budget in which they squeeze 
     their own traditional constituencies and not just those of 
     the other side. But ``corporate tax increases,'' the 
     principal burdens of which would likely fall on retired 
     workers and lower-income renters, prove nothing of the kind.
       Current law imposes a prohibitive penalty in addition to 
     the corporate income tax on withdrawals of supposedly excess 
     amounts from pension funds unless the money is used to help 
     pay retiree health benefits. The House bill would greatly 
     reduce the penalty and in effect ease the definition of 
     excess while permitting withdrawals for any purpose an 
     employer wished.
       Billions would likely be withdrawn, and since the 
     withdrawals would still be subject to tax, it's true that 
     revenues would go up. But organized labor, the Clinton 
     administration and such groups as the American Academy of 
     Actuaries have warned that the soundness of a significant 
     number of pension funds could well be threatened in the 
     process. They note that the value of pension fund assets 
     are volatile; they go up when the stock and other 
     securities markets are strong but can just as easily turn 
     down again. It's hard to know exactly where to draw the 
     danger line in a matter such as this, but it's easy to 
     know on which side to err. The Senate last Friday wisely 
     decided to err on the side of caution and knocked a 
     similar pension provision out of its bill by a vote of 94 
     to 5.
       The phase-out of the housing credit was never in the Senate 
     bill. The credit is one of the few remaining devices for 
     adding to the stock of low-income housing in the country. The 
     subsidized housing programs on the spending side of the 
     budget are being cut back, if not shut down, even as the need 
     for such housing continues to grow.
       The credit is probably not the most efficient way to 
     produce the housing, but it has been a steady source of added 
     supply at relatively modest cost, and it would seem to be 
     perfect Republican program in that the housing would be 
     provided mainly through private initiative.
       The House bill would use the proceeds from both these 
     corporate ``tax increases'' mainly to finance the extension 
     of other corporate tax breaks. For the corporate sector as a 
     whole, they're a wash, while in social terms they would leave 
     the budget more lopsided, not less. On these two issues, 
     present law should be preserved.
                                                                    ____


             [From the Philadelphia Inquirer, Oct. 3, 1995]

                             Pension-Mania

       Workers and retirees will be hurt if Congress allows 
     companies to raid pension funds easily.
       It was a standard scam of the Decade of Greed: Corporate 
     raiders skimmed off pension funds to pay their debt and line 
     their pockets. Managements of companies such as Simplicity 
     Pattern Co., Faberge Inc. and Pennsylvania Engineering Corp. 
     removed a total of $21 billion from pension funds in the 
     1980s. Congress finally stopped this in 1990 with a 
     prohibitive tax.
       Lo and behold, only five years later, the House Ways and 
     Means Committee has voted to end the special, 50 percent tax 
     that has stopped companies from raiding pension funds. The 
     panel's Republicans say, unpersuasively, the relief would 
     apply only to pension funds holding millions more than they 
     really need.
       In reality, this change is a needless risk to workers, to 
     retirees and to the federal corporation that safeguards the 
     system. The Pension Benefit Guarantee Corporation is 
     adamantly opposed to the change. Indeed, the PBGC says it 
     would let companies use pension plans ``as tax-free corporate 
     checking accounts.''
       Considering how important pensions are to workers and 
     retirees, it's not clear that the rules ought to be changed 
     at all. When a company's pension-fund investments have done 
     extremely well, creating a real excess, the company gets the 
     benefit of going years without putting more money into the 
     plan. Or, the company can transfer some or all of the excess, 
     without penalty, to pay for health-care benefits for 
     retirees.
       Even those who say the 50 percent tax should be lowered 
     must admit that the House Republican plan goes way too far. 
     It proposes only a 6.5 percent tax on withdrawals of 
     supposedly excess pension funds, and for the first half of 
     1996, no penalty at all!
       This is a gimmick to raise revenue--since corporations 
     would pay income tax on the pension money they withdraw. But 
     lawmakers shouldn't be indulging in tax gimmicks at all, let 
     alone one that could undercut the safety of pensions for 
     millions of workers and retirees.
       The biggest flaw in the House plan is how it defines a 
     pension plan with truly ``excess'' funds: A plan that holds 
     more than 125 percent of its current liabilities--that is, 
     the pension benefits employees have already earned.
       But the PBGC says that threshold isn't nearly high enough. 
     A new report by a business group called the Committee for 
     Economic Development, anticipating how baby boomers will 
     burden the pension system, expresses similar concern.
       The retirement security of American workers has been 
     hammered in recent years by corporate downsizing, corporate 
     raiders and the like. Now it's being shaken further by cuts 
     in entitlements such as Medicare. A new raid on pension funds 
     makes no sense whatsoever.
                                                                    ____


          [From the Long Island (NY) Newsday, Sept. 21, 1995]

              The New Tax-Free Corporate Checking Account

                            (By Marie Cocco)

       You can tell when something big is happening at the House 
     Ways and Means Committee. The lobbyists all age by about 25 
     years and undergo sex-change operations, as the powerful 
     replace the mere note-takers.
       The power quotient was unimpressive this week as the panel 
     crafted a measure billed as one to close corporate loopholes. 
     Still lots of empty seats; still too many twentysomething 
     women clutching cellular phones. And that got Rep. Jim 
     McDermott (D-Wash.) wondering.
       ``Here we have a $10-billion tax increase and nobody 
     cares,'' he noted. ``So you have to ask yourself, what's 
     wrong here?''
       An appropriate question. Here's the answer: The $10.5-
     billion tax ``hike'' innocuously labeled ``corporate pension 
     reversions'' on the committee's charts is in fact an 
     invitation for corporations with rich pension funds to raid 
     the accounts and use the money however they wish. Golden 
     parachutes. Higher stock dividends. Corporate jets. You name 
     it.
       Students of the 1980s will recall that during the heyday of 
     the leveraged buyout, a fat pension fund often put a company 
     ``in play.'' That is, the pension assets in excess of what 
     was expected to be needed for retirees became a piggyback. 
     Market-manipulators used the money to pursue other companies. 
     Or a new owner who'd conquered a takeover target would 
     terminate the pension plan, buy less generous annuities for 
     the retirees and skim off the excess.
       The Pension Benefit Guarantee Corp. says about $20 billion 
     was siphoned from pension funds during this binge. But that's 
     only about half the $30 to $40 billion the pension-insurance 
     agency estimates would be drained out by reopening this 
     scheme.
       How does it work?
       Under rules passed in 1990, a corporation can remove 
     pension money without penalty only if the funds are used to 
     pay retirees' health benefits. Otherwise, the company pays a 
     stiff tax penalty on the withdrawal, in addition to income 
     taxes.
       The measure pushed through by committee Republicans would 
     wipe out the penalty. Companies would pay only income taxes 
     on the withdrawal. That's how the GOP estimates raising $10.5 
     billion in new revenue.
       But that assumes corporations will actually pay taxes on 
     the withdrawal. More likely, they will time them to coincide 
     with tax losses. They could construct it so it's all a wash.
       ``It has the effect of creating a tax-free corporate 
     checking account,'' said Assistant Treasury Secretary Leslie 
     B. Samuels, who, with the Democrats on the panel, tried to 
     dissuade the Republicans.
       The opponents pointed out that even pension funds that are 
     technically ``overfunded'' now could become underfunded with 
     a stock market downturn or interest-rate change. They argued 
     that pension money belongs to current and future retirees. 
     They tried to warn them that, since the government insures 
     pensions, the Republicans could be paving the way for the 
     next savings-and-loan debacle.
       The Republicans said Democrats just don't understand free 
     markets. ``I can't believe that they don't understand our 
     economic system!'' Rep. William Thomas (R-Calif.) shouted. 
     Pension money should be used for productive investments, he 
     argued, not left ``just sitting there doing nothing.''
       Someone should let him know pension funds are the nation's 
     largest source of capital; they own a fifth of all corporate 
     stock. 

[[Page H 11921]]
     That would clear up the free-market argument. But it won't save the 
     Republicans from themselves.
       Days ago, they howled about protecting pensions from the 
     clutches of the Clinton administration. The Labor Department 
     provides information on investments in things like hospitals 
     and small businesses to pension managers; the managers 
     control where to invest. The House abolished the program.
       ``Our message is simple,'' Majority leader Dick Armey (R-
     Texas) crowed. ``Keep your paws off our pensions.''
       It's a good sound bite. But nothing more than that.
                                                                    ____


            [From the Pittsburgh Post-Gazette, Oct. 1, 1995]

   Pension Raid--Don't Raise Revenues by Threatening Pension Benefits

       In the 1980s, corporate pirates didn't need a map to find 
     the buried treasure--it was right there in the pension fund.
       High interest rates and a galloping stock market had made 
     many funds flush. Frequently a company with a very healthy 
     pension became a takeover target--leverage buyouts were 
     followed by termination of the pension fund and the use of 
     the excess cash to pay off debt.
       If workers' welfare had been insulated from all the high-
     finance brinkmanship, perhaps it wouldn't have been an issue. 
     But often the plans were replaced with lesser-value pensions 
     or, on occasion, no pensions at all.
       Starting in 1986, Congress set up a system allowing 
     corporations to draw down excess funds, but with a small 
     excise tax--10 percent at first, later raised to 15 percent.
       But that didn't shield workers. Many overfunded pensions 
     ended up being underfunded. Twenty of the top 50 underfunded 
     pension plans had been subject to ``reversions,'' as the 
     draw-down is called.
       In 1990 Congress passed a 50 percent excise tax on 
     businesses that terminate plans and fail to set up a 
     successor plan with similar benefits. The tax is 20 percent 
     on those that replace the plan. Reversions are allowed 
     without penalty if the money is used to pay retirees' health 
     benefits.
       That's a fairly happy ending to the story. But watch out 
     for the epilogue. Last week the House Ways and Means 
     Committee voted to open pension plans up yet again. Plans 
     that are funded at 125 percent or higher can be drawn down 
     without penalty through June 1996. After that, the excise tax 
     will be only 6.5 percent.
       The gambit will raise $9.5 billion for the federal Treasury 
     in corporate income tax, but congressional experts estimate 
     that it will drain pension funds of some $40 billion in 
     assets--double the amount that was drawn down in the 1980s.
       The federal pension insurance program has decried the move. 
     The three Cabinet secretaries that sit on its board--Commerce 
     Secretary Ron Brown, Treasury Secretary Robert Rubin and 
     Labor Secretary Robert Reich--cited a host of reasons why 
     this is a bad idea.
       A pension that is 125 percent funded on an ongoing basis 
     may well be underfunded if it were terminated immediately and 
     had to make good on its obligations. Most plans will not be 
     terminated immediately, but some will and their beneficiaries 
     won't be adequately covered. That will put a strain on the 
     federal insurance system and will probably reduce benefits 
     for some pensioners.
       Even if the plans aren't terminated, interest rates and 
     market conditions change. Plans that are overfunded today 
     weren't three years ago and may not be three years from now. 
     Keeping a cushion makes sense under those circumstances. In 
     the 1980s, many overfunded plans that were drawn down ended 
     up underfunded.
       Another concern is that companies receive considerable tax 
     advantages to contribute to pension funds, but will be 
     allowed to withdraw with no penalty.
       That will open the door to a lot of financial gamesmanship. 
     Also, the pension raid would be encouraged despite the well-
     known need to bolster private savings.
       Surely there are better ways to balance the budget then to 
     gamble with the security of private pensions covering 
     millions of Americans.
                                                                    ____


            [From the Cleveland Plain Dealer, Oct. 3, 1995]

                           Cut Now, Pay Later

       Congress should reconsider tax cuts rather than ask poor 
     people and pensioners to pay for them.
       Not surprisingly, members of Congress who approved a $245 
     billion tax cut earlier this year are struggling now with the 
     delicate question of how to pay for such excess.
       A bill recently adopted by the House Ways and Means 
     Committee, for example, would help to finance the tax cut by 
     raising about $39 billion over seven years. Some of the 
     bill's provisions make sense. Others are downright foolish.
       One of the most worrisome proposals would make it easier 
     for companies to withdraw money from their pension funds. 
     Under the bill, companies would no longer face severe 
     penalties for withdrawals from pension funds as long as the 
     maintained a cushion of 125 percent of the assets they needed 
     to meet their pensions' liability. The proposal, which would 
     allow companies to withdraw funds for any purpose, would 
     increase federal revenue because companies must pay taxes on 
     withdrawals.
       Supporters of the change contend that a 125-percent cushion 
     is adequate. But critics, including the federal Pension 
     Benefit Guaranty Corp., warn that a seemingly comfortable 
     cushion could vanish if the stock market tumbles, because 
     many pension funds are heavily invested in the stock market.
       Given the federal government's potential liability, and 
     disasters like the savings and loan crisis, Congress should 
     be wary indeed of loosening restrictions. Tough penalties on 
     withdrawals were instituted precisely to avoid a taxpayer 
     bailout of pension funds.
       Another ill-advised House proposal would raise $23 billion 
     by sharply reducing the earned income tax credit, which 
     allows the working poor to receive a credit from 
     the government even if they don't owe taxes. The Senate 
     Finance Committee, meanwhile, is endorsing an even larger 
     cut in the credit--$42 billion over seven years.
       Lawmakers are hoping to limit the credit, which was 
     expanded greatly in President Bill Clinton's 1993 economic 
     package, in several ways. Some of the proposals merit 
     consideration--including one that would make childless 
     workers ineligible for the credit, and another that would 
     take into account income from Social Security and other 
     outside sources when determining eligibility for the credit.
       Lawmakers should be wary, however, of reducing the value of 
     the credit for the people it was principally intended to 
     help--poor families struggling to survive on low wages. The 
     earned income tax credit was designed to encourage poor 
     breadwinners to take low-wage jobs instead of relying on 
     welfare and related benefits. It is one of the last tax 
     incentives that should be trimmed, not one of the first.
       Congress clearly needs to balance its lopsided books. But 
     lawmakers must take a long-term approach. Reducing pension 
     protections and tax credits for poor breadwinners may swell 
     the federal treasury in the short run. But such steps could 
     increase government spending in the long run.
       Senate Majority Leader Bob Dole, who raised the possibility 
     Sunday of not providing the full $245 billion tax cut, is on 
     the right track. If Congress wants to avoid blame for foolish 
     tax increases, it should give up foolish tax cuts.
                                                                    ____


        [The Harrisburg (PA) Sunday Patriot-News, Oct. 1, 1995]

                      Protect Pension Fund Assets

       During the wave of corporate buyouts in the 1980s, pension-
     fund monies were used to accomplish two-thirds of the largest 
     mergers, according to Commerce Secretary Ron Brown. All told, 
     about $20 billion was lifted from private retirement funds to 
     facilitate corporate takeovers.
       But if congressional Republicans have their way, that 
     period of pension-fund raiding will seem modest.
       Last week, the House Ways and Means Committee approved 
     legislation that would allow corporations to remove $30 
     billion to $40 billion from pension funds over the next five 
     years for other purposes. Republicans hope to capture about 
     $9.5 billion of that in taxes to put toward balancing the 
     budget.
       In the process, they may well put some pension funds at 
     risk. As most are government guaranteed, taxpayers could be 
     the losers in the end, along with affected workers and 
     retirees.
       Proponents claim that the 25 percent cushion above current 
     liabilities that the measure provides is more than adequate 
     to protect the country's 11 million employees and 2 million 
     retirees covered by private pension plans. In addition, they 
     argue that if the surplus pension money is reinvested in 
     plant and equipment it could mean more jobs and a stronger 
     company.
       According to Ways and Means Chairman Bill Archer, the 
     proposal could actually make pension plans more attractive to 
     business and encourage them to make larger contributions.
       But as Labor Secretary Robert Reich noted, you couldn't 
     prove that by what happened in the 1980s. An analysis by the 
     federal Pension Benefit Guaranty Corp. found that of 50 
     pension funds on an underfunded watch, 20 experienced 
     withdrawals in the 1980s of what were then considered 
     surplus assets.
       In addition, the agency said that an examination of 10 
     large pension funds found that the 125 percent limit was not 
     sufficient to protect them if they were terminated because of 
     corporate bankruptcy. Less than 90 percent of the money 
     required to meet obligations would be available, according to 
     the agency.
       The agency further noted that funds currently considered 
     sufficient could become underfunded by a modest shift in the 
     market that reduced interest rates by one percent, combined 
     with a 10 percent decline in the value of assets.
       Even the pro-business Committee for Economic Development 
     has warned that the present full-funded standard of 150 
     percent of liabilities is insufficient to ensure the long-
     term viability of pension funds.
       The 1980s corporate-takeover frenzy, fueled in part by 
     raids on pension funds, took a heavy toll on this country in 
     terms of quality companies that were destroyed, thousands of 
     jobs that were lost, damage inflicted on the environment to 
     pay off debts, pension-fund depletions and the loss of 
     employee trust in employers.
       It boggles the mind to think that the stage might be set to 
     go through that again, and at twice the rate of the 1980s.
                                                                    ____


[[Page H 11922]]


          [From the Fort Worth Star-Telegram, Sept. 22, 1995]

                              And Pensions

       And on the subject of ideas in new tax bills, one of the 
     worst is the plan to allow corporations to withdraw money 
     from their pension plans. The withdrawals would be taxed--an 
     estimated $10.5 billion over seven years--but this is a bad 
     idea for two reasons.
       First, Americans are worried about their retirement years. 
     What can they count on? Letting corporations use supposedly 
     ``excess'' pension funds for other purposes merely adds to 
     the public's unease about its old age.
       Second, the federal Pension Benefit Guaranty Corp.--one of 
     those federal insurance programs, like insured bank deposits, 
     that are ignored until they cost the taxpayers billions of 
     dollars--could have to rescue pension plans that become 
     underfunded because of corporate withdrawals.
       We do not need another S&L-style bailout because someone 
     got greedy and saw a way to get more revenue without raising 
     taxes.
                                                                    ____


        [From the Spartanburg (SC) Herald-Journal, Oct. 2, 1995]

   Leave Pension Funds Alone--Congress Shouldn't Enable Companies To 
                      Endanger Retirees' Benefits

       Congress should back away from a plan to let companies 
     spend ``excess'' funds in their pension programs.
       The plan, which was approved by the House last week, is 
     popular with businesses because it would allow companies to 
     use funds that aren't needed to meet pension obligations.
       It is popular with Republicans in Congress because it is 
     expected to generate $9.4 billion in new federal revenue.
       But it's likely to become unpopular with the rest of us if 
     it ends up affecting our pensions, which it is likely to do.
       A key question is: How much money in a pension fund is 
     ``excess?''
       The proposed measure would apply to companies that have at 
     least 25 percent more money in their pension funds than is 
     needed to cover benefits already earned by their employees.
       About 40 percent of the pension funds insured by the 
     government fall into this category. Companies are expected to 
     spend up to $40 billion of this money if the law is passed.
       But 25 percent is not much of a safety margin when dealing 
     with financial investments. The Pension Benefit Guaranty 
     Corp., the government agency that insures pensions, requires 
     more cushion than that when a company terminates a pension 
     plan.
       Most pension plan funds are used to buy stocks, bonds and 
     other investment vehicles. The growth of those investments 
     has led to the excess funds in the pension plans.
       But what happens if the stock market plunges? If the 
     investments of a plan go sour? All of a sudden, a pension 
     plan that had excess funds no longer has the funds it needs 
     to meet its obligations.
       Who pays the pensions for the retirees then?
       Taxpayers, through the Pension Benefit Guaranty Corp.
       Does it sound familiar? Think Savings and Loan.
       Companies were allowed in the '80s to use excess pension 
     funds for business use. About $20 billion was taken out of 
     pension funds then, according to the Guaranty Corp. The money 
     often was used to pay for leveraged buyouts and mergers.
       Workers at many of those companies had their pensions 
     replaced by plans with much lower benefits.
       In response, Congress placed a 50 percent excise tax on 
     money taken from pension plans. The current proposal would 
     eliminate that tax.
       It should not be allowed to become law.
                                                                    ____


                      Don't Support Pension Raids

       Smoke and mirrors would be preferable to a proposal 
     approved by the House Ways and Means Committee last month to 
     let healthy companies withdraw from their workers' pension 
     funds.
       The proposal is designed, primarily, to raise $10 billion 
     in federal tax revenue at a time when the government is 
     desperate for money. Giving companies access to large sums of 
     money would also accommodate business expansion, helpful to 
     the economy just about any time.
       The problem is it would subject workers' pensions to 
     unacceptable risk, which seems especially unwise during a 
     time of such uncertainty for Social Security. And in the 
     event of a few large defaults, it could pin the cost of a 
     huge bailout by the federal Pension Benefit Guaranty Corp. on 
     taxpayers. After the federal savings and loan debacle, that's 
     the last thing we need.
       The Republicans' plan is to let companies borrow from 
     pension plans that have at least 125 percent of the money 
     they are estimated to need to pay current employees' 
     pensions. While such loans are now allowed, the government 
     imposes penalties on them of 20 percent to 50 percent, and it 
     taxes the money as ordinary income. Consequently, most 
     companies choose other ways to raise money. Under the 
     proposal passed by the Ways and Means Committee, the penalty 
     would be eliminated until next July 1 and raised to only 
     6.5 percent thereafter.
       This would undoubtedly encourage hundreds of healthy 
     companies to raid their pension funds, providing a windfall 
     for the government, which would continue to collect taxes on 
     the money taken out. If everything goes according to plan, 
     there wouldn't be a problem. But if the economy stumbled and 
     the stock market tumbled--most pension funds are heavily 
     invested in it--look out below.
       In an instant, pensions would be dangerously underfunded, a 
     situation that, uncorrected, could require massive infusions 
     of cash from the PBGC. Without them, pension obligations 
     might not be met. And with them, the government agency might 
     have to turn to taxpayers--just as the Federal Deposit 
     Insurance Corp. did when it had to bail out the S&Ls. A 
     chilling thought.
       Not surprisingly, there is widespread opposition to the 
     plan among labor unions and the American Association of 
     Retired Persons. The head of the PBGC is also against it. And 
     that ought to convince President Clinton to veto the measure 
     should the Republicans, as expected, muster enough votes to 
     get it through Congress.
                                                                    ____


                 [From the Joplin Globe, Oct. 5, 1995]

        Proposal Would Allow Corporations To Raid Pension Plans

       It appears that little is immune from Congressional 
     budgetary deliberations. If it can be cut or it will raise 
     money, it seems to be fair game for Congress.
       Now, pension funds are among the fair game.
       The House Ways and Means Committee has approved a proposal 
     to allow corporations to raid their pension plans, raising 
     billions for the government through income taxes paid on the 
     withdrawals.
       Proponents say the measure would lead to greater retirement 
     protection while raising $9.5 billion for the government. 
     Corporations support the measure because they say withdrawal 
     of excess assets from pension funds can help workers if the 
     money is used to expand and create more jobs.
       Opponents say it would endanger the retirement security of 
     millions of Americans, just like it did in the 1980s, when 
     companies legally tapped pension plans, leaving many under-
     funded as a result.
       Among the opponents are three cabinet secretaries who are 
     members of the Cabinet-level board overseeing the federal 
     Pension Benefit Guaranty Corp. (PBGC), which insures pension 
     plans and takes over those that fail.
       They say the proposal would trigger withdrawal of up to $40 
     billion from pension plans in the next five years--twice that 
     removed by companies during the corporate takeover frenzy of 
     the 1980s.
       Under the provision, withdrawals from pension funds would 
     be allowed at any time and for any purpose. Currently, 
     withdrawals are allowed only for use in retirees' health 
     benefits. The proposal would require corporations making 
     withdrawals to leave a cushion of 25 percent more than needed 
     to meet current liabilities.
       Allowing companies to dip into their pension funds would 
     lead more of them to make large pension contributions for 
     cushioning or, if they don't already offer pensions, to 
     create them, said Congressman Bill Archer, R-Texas, Ways and 
     Means Committee chairman.
       Labor Secretary Robert Reich, one of the PBGC board 
     members, said it didn't happen that way in the 1980s. He said 
     that at that time the money often was used to finance 
     leveraged buyouts, sometimes leaving pension plans 
     underfunded.
       Luckily, participants in plans that are underfunded won't 
     be blind-sided. The Retirement Protection Act, approved last 
     year, will offer some protection.
       Beginning this year, the act requires companies with more 
     than 100 employees in under-funded pension plans to notify 
     workers if the plan is less than 90 percent funded. That 
     means, for example, that an 80 percent-funded plan could pay 
     only 80 percent of its promised benefits, if the plan failed. 
     The new ruling will apply to companies with fewer than 100 
     plan participants beginning next year.
       These notifications must provide information about the 
     plan's funding status and explain the maximum amount of 
     benefits the PBGC would pay if the plan failed, said Robert 
     Pennington, an academic associate at the College for 
     Financial Planning, a division of the National Endowment for 
     Financial Education. The maximum benefit the PBGC's 
     insurance fund now pays to a participant is $2,574 a 
     month.
       The total pension shortfall of plans governed by the PBGC 
     is $71 billion. Some plans are under-insured by more than 40 
     percent, according to the PBGC, whose own insurance fund is 
     under-funded.
       If you receive a notice that your plan is under-funded, 
     Pennington said these are some of the things to consider:
       How much is the plan under-funded?
       Find out how the benefits are being funded.
       Think about building a nest egg to cushion the losses.
                                                                    ____


           [From the Burlington (IA) Hawk Eye, Oct. 1, 1995]

                            Pensions at Risk

       Congress: New budget plan would let companies raid funds.
       Hidden in the congressional budget plan is a proposal that 
     would allow unprecedented abuse of employee pension funds.
       Never at a loss for an analogy, Labor Secretary Robert 
     Riech said ``You're going to see raids on pension assets that 
     will make the train robberies during the days of Jesse James 
     pale by comparison.''

[[Page H 11923]]

       The provision would let companies withdraw funds from 
     pension funds if their assets exceed 125 percent of the 
     plan's current liability.
       Companies could use the money for any reason.
       The provision actually encourages companies to withdraw 
     money by abating the federal excise tax on withdrawals made 
     before next July. After that a 6.5 percent tax would apply.
       Republicans gleefully predict that $40 billion could be 
     withdrawn over the next five years. That could produce a 
     windfall in taxes.
       Their other argument is that companies could use the money 
     to expand or create jobs, although the law does not require 
     that. Companies could just as easily pay bonuses to top 
     executives or finance the campaigns of friendly politicians.
       A flurry of withdrawals would create a nightmare for 
     pensioners--and taxpayers.
       Since 1974, more than 2,000 pension funds have failed. They 
     were bailed out by the Federal Pension Benefit Guaranty Corp.
       The fund insures 56,000 pension plans and 33 million 
     employees. It effectively obligates taxpayers to guarantee 
     pensions when private businesses do not.
       The obligation is substantial; at last report, U.S. pension 
     funds were underfunded by $71 billion.
       Reich argues soundly that pension plans whose principal is 
     depleted today might not be able to meet their long-term 
     obligations.
       Lost in the debate is why companies should be allowed to 
     raid pension funds at all. Or at least without any obligation 
     to assure their solvency.
       A compromise might allow companies to borrow, not simply 
     appropriate pension funds. That would offer employees and 
     taxpayers a reasonable assurance that the pensions will be 
     there, while giving companies a low-cost and renewable source 
     of money for expansion or other legitimate purposes.
       But then reasonable solutions are not what Congress is 
     necessarily searching for.
                                                                    ____


           [From the Tribune, Meadville (PA), Sept. 17, 1995]

Don't Let Companies Raid Pension Plans--Surpluses Mean Future Security 
                              for Workers

       A House committee last week passed a new tax bill that 
     would not only eliminate the earned income tax credit for 
     many poor families, but would jeopardize the retirement 
     income of millions of American workers.
       The bill would allow corporations to spend surplus money in 
     pension plans rather than preserve the funds for the health 
     of the plans to ensure the future security of their work 
     forces.
       Companies with 25 percent more money in their pension plans 
     than is needed to cover benefits would be able to use that 
     money as they see fit. About 40 percent of the 58,000 pension 
     plans insured by the Pension Benefit Guaranty Corp. currently 
     fit that description, according to congressional estimates.
       Legislators are looking at the funds as a means to help 
     raise revenue to reduce the deficit. If companies were to use 
     the money, it would generate about $10 billion in tax revenue 
     over the next seven years.
       The irony is that many of the pension plans in question 
     have developed surpluses because companies use them as a tax 
     dodge. By dumping money into the pension plans, the 
     corporations are able to reduce their tax liability. If 
     Congress wants to generate more tax revenue, it should 
     legislate against the misuse of legitimate pension funds.
       It is likely given the experience of pension fund raids in 
     the 1970s and 1980s, that new raids by companies would help 
     fund the current rage toward big mergers, resulting in untold 
     layoffs and lost jobs.
       Some of the pension surpluses also reflect accounting 
     maneuvers rather than actual assets, raising the prospect 
     that nationwide pension raids would jeopardize the solvency 
     of some plans.
       That's why the Pension Benefit Guaranty Corp. opposes the 
     plan, which should be defeated or vetoed.
                                                                    ____
                                  

                          ____________________