[Congressional Record Volume 141, Number 176 (Wednesday, November 8, 1995)]
[Senate]
[Pages S16830-S16831]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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   PENSION REVERSION PROVISIONS IN BUDGET RECONCILIATION LEGISLATION

 Mrs. KASSEBAUM. Mr. President, the budget reconciliation 
legislation passed by the House of Representatives includes a measure 
that would generate approximately $10 billion in tax revenue by doing 
away with penalties Congress imposed in 1990 on pension fund 
withdrawals. The House proposal allows companies to withdraw so-called 
excess funds from pension plans for any purpose, without informing plan 
participants or beneficiaries.
  As my colleagues know, the Senate on October 27 voted overwhelmingly 
to remove a similar provision from the Senate reconciliation 
legislation. While the Senate reversion provision was more narrowly 
tailored in many respects than its companion in the House bill, 94 
members of this body voted to remove it.
  The reason that members of this body rejected that proposal so 
resoundingly, I believe, is because even the more modest provisions 
contained in the Senate bill would have represented a significant shift 
in pension policy. Moreover, the Senate Committee on Labor and Human 
Resources Committee has not considered fully the ramifications of such 
a change.
  And those ramifications are, potentially, tremendous. There are 
approximately 22,000 pension plans covering 11 million workers and 2 
million retirees that have assets in excess of 125 percent of current 
liability, and the Joint Committee on Taxation estimates that the 
pension reversion provisions contained in both the House and Senate 
bills could result in the removal of tens of billions of dollars in 
surplus assets from these plans.
  The last time Congress did address the reversion issue, we acted 
decisively to enact strong measures to protect workers' pensions. In 
response to a wave of corporate takeovers and pension raids in the 
1980s, Congress in 1990 imposed a 50 percent excise tax on pension fund 
reversions, except in limited circumstances. The idea was to make it 
costly for companies to take assets from their pension plans. And, in 
fact, the raids on assets ceased almost entirely. Before this change, 
however, about $20 billion was siphoned from pension funds in just a 
few years, many pension plans were terminated, and thousands of workers 
saw their pensions replaced by risky annuities that in many cases 
provided lower benefits.
  Let me be clear. There may be valid reasons to reconsider this 
policy. I believe strongly, however, that any changes in this area, and 
of this magnitude, should be made based on sound pension policy and not 
to satisfy budgetary demands. Therefore, I do not believe that changes 
to the current pension reversion policy should be included in budget 
reconciliation and I strongly urge the Senate conferees to insist on 
the Senate position.
  Having said that, Mr. President, I realize the difficult task ahead 
for all budget conferees. While the Finance Committee budget conferees 
have a strong vote to bolster the Senate position, I realize that the 
House will be equally insistent.
  If pension reversion provisions are to be included in the final 
reconciliation package, they should be carefully and conservatively 
constructed to ensure--above all--that each pension plan retains a 
cushion sufficient to weather changes in the current business climate, 
and ultimately to meet its obligations to participants and retirees. In 
this regard, I would like to associate myself with the very excellent 
and thoughtful remarks made on October 26 by Representative Harris W. 
Fawell. Representative Fawell is one of the most knowledgeable Members 
of the House on issues regarding employee benefits, and he has been an 
outspoken leader on the issue of pension reversions.
  Because the threshold beyond which assets may be withdrawn under the 
House proposal can be less than the threshold of assets required in the 
event of an actual plan termination, the House proposal effectively 
would allow even companies in bankruptcy to terminate a plan or remove 
funds from a plan with no guarantee that the remaining assets would be 
sufficient to pay for all plan benefits. This clearly is unacceptable.
  To ensure that pension assets are as safe as possible, it is 
essential that the formula for allowing employers to remove funds from 
pension trusts be based on the most conservative of actuarial 
principles. Therefore, I believe companies should be required to use a 
minimum asset cushion based on the greater of 125 percent of 
termination liability based on PBGC assumptions, rather than current 
liability, or accrued liability, whichever is greater.
  To further ensure that pensions are secure, companies must be 
required to use conservative actuarial assumptions for interest, 
mortality, and expected retirement based on the guidelines issued by 
the Pension Benefit Guaranty Corporation [PBGC]. I realize some would 
prefer to leave this calculation to the discretion of a company's 
actuary. However, I do not believe it is prudent to allow absolute 
discretion without more fully considering the possible risks that may 
result from allowing the use of differing assumptions.
  For example, the PBGC estimates that a plan whose current liability 
is 125 percent funded may in fact be less than 100 percent funded for 
purposes of its liability at plan termination. While the PBGC 
calculations may not be perfect, the risk to participants and taxpayers 
from an underfunded plan dictates that companies taking reversions rely 
on these assumptions.
  In addition, there should be real limits both on the use of excess 
pension funds, and on the types of situations in which companies are 
allowed to take reversions. For example, a company generally should not 
be allowed to withdraw funds for new plant and equipment while it 
leaves another pension plan underfunded or fails to meet its 
obligations toward a defined contribution plan. Nor should a company in 
bankruptcy be allowed to take a reversion without further protections.
  Finally, as the Senate provision originally provided, plan 
participants and beneficiaries must be given notice of pension 
withdrawals in advance, and must be afforded all the protections 
normally provided under title I of the Employee Retirement Income 
Security Act [ERISA].
  Mr. President, let me emphasize again that I strongly prefer that no 
changes be made in this area--at least until such changes can be 
properly considered by the Labor Committee. But if, and when, such 
changes are to be made, they must be crafted carefully and 
conservatively to protect participants, retirees, and taxpayers; they 
must include protections normally provided to participants and retirees 


[[Page S 16831]]
under title I of ERISA; and, most importantly, they must be premised on 
principles of sound, long-term pension policy instead of temporary 
revenue generation.
  Because of the extreme complexity of this issue, it is difficult to 
believe that all aspects have been appropriately considered. To cite 
just a few examples, there may need to be special consideration given 
to employee contribution plans, and to plans covering a very small 
number of participants. Neither the House nor the Senate proposals take 
these situations into consideration.
  In closing, therefore, I would like my colleagues to know that the 
Labor and Human Resources Committee may very well consider the issue of 
pension reversions early next year. Should a pension reversion proposal 
emerge from the House-Senate reconciliation conference that varies 
markedly from the goals I have outlined here, there is a much greater 
likelihood that the Labor and Human Resources Committee will revisit 
this issue.
  Thank you, Mr. President. I yield the floor. 

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