[Congressional Record Volume 142, Number 138 (Monday, September 30, 1996)]
[Senate]
[Page S12021]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         REACH-BACK TAX RELIEF

 Mr. CONRAD. Mr. President, I am pleased to join Senator 
Cochran in sponsoring this reach-back tax relief bill, S. 2135, to 
alleviate some of the unintended and inequitable hardships inflicted on 
certain companies by the Coal Industry Retiree Health Benefits Act of 
1992. Our bill would provide substantial relief to numerous small 
companies. It would also use a small portion of the existing surplus of 
more than $120 million in the combined health benefit fund created by 
the act to allow a 2-year moratorium on the reach-back premiums. This 
2-year period will give the Congress adequate time to study the current 
operations of the act and to remedy the inequities of the current law.
  In the past, I have said that the Coal Act produced several major 
achievements. First, it assured retired coal miners and their 
dependents that their health benefits were permanently secure. The act 
provided a statutory foundation to carry out the commitment of all of 
us to see that these benefits are paid. It also provided a necessary 
legal mechanism to transfer excess pension funds into the health funds. 
In addition, the act required certain cost-containment measures that 
greatly increased the cost effectiveness of retirees' health benefit 
programs.
  Despite its significant accomplishments, one feature of the Coal 
Act--its reach-back funding mechanism--has engendered great hardship 
and controversy. Many companies, who long ago had withdrawn from the 
Bituminous Coal Operators Association [BCOA] believing that they had 
met all of their legal obligations to fund retiree health benefits, 
found themselves, in 1992, subject to a draconian reach-back premium 
tax that they could not have foreseen and for which they could not have 
planned. This retroactive tax enforced by the full power of the 
Internal Revenue Service and the threat of dramatically compounding 
penalties has produced severe hardship for many companies subject to 
it. Some of them are trying to pay it by depleting their assets and 
hence their ability to generate income. Others have tried to ignore it 
and are now being subjected to collection suits by the Combined Fund.
  The 102d Congress was persuaded that the Bituminous Coal Operators 
Association could no longer afford to fund retired miners' health 
benefits on a current basis as it had for the previous 25 years. The 
Congress was told that miner's health benefits faced a crisis of 
skyrocketing costs that would bankrupt the miners' benefits fund if the 
Congress did not act. The Congress was given a choice of either an 
industrywide tax or the reach-back tax to fund health benefits. The 
passage of the Coal Act saves members of the BCOA more than $100 
million a year over its prior annual benefit payments.
  Fortunately the skyrocketing costs predicted by the BCOA have simply 
not occurred. The cost containment measures contained in the act and 
the decline in population of retirees and dependents served by the fund 
are largely offsetting the inflation in health care costs. Thus, the 
reach-back tax is simply injuring companies who cannot afford to pay it 
while giving members of the BCOA a windfall benefit which they do not 
want to give up.
  Mr. President, the problems being caused by the reach-back tax are 
just beginning. Many original supporters of the Coal Act recognize that 
it needs some fine tuning. The Cochran-Conrad bill would provide for a 
GAO study of current operations and a 2-year respite from the reach-
back tax, while assuring that the overriding goal of providing health 
care benefits of retired miners is preserved. I hope that my colleagues 
on the Senate Finance Committee will give this legislation the early 
consideration it deserves in the new Congress.

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