[Congressional Record Volume 143, Number 98 (Friday, July 11, 1997)]
[House]
[Pages H5174-H5175]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        SAVE TIAA-CREF; STOP TAX HIKES ON THE ACADEMIC COMMUNITY

  The SPEAKER pro tempore (Mr. Gibbons). Under a previous order of the 
House, the gentleman from Massachusetts (Mr. McGovern) is recognized 
for 5 minutes.
  Mr. McGOVERN. Mr. Speaker, the Teachers Insurance Annuity 
Association-College Retirement Equities Fund, which has been dubbed 
TIAA-CREF for short, provides retirement benefits exclusively for 
employees of U.S. colleges, universities, independent schools, and 
other nonprofit educational and research organizations. Nearly 2 
million current and retired employees at over 6,000 institutions 
nationwide are served by TIAA-CREF. Participating institutions 
contribute amounts on behalf of their employees where they are invested 
in self-directed, tax-exempt accounts. Upon retirement, the amounts 
accumulated are used to purchase annuities to provide lifetime income. 
Like other pensions and annuities, distributions to retirees are taxed 
as ordinary income when received.
  Now, I do not know how many of my colleagues are aware of this fact, 
but the House Republican tax bill would repeal, would repeal the tax-
exempt status of TIAA-CREF's pension program. TIAA-CREF would then be 
treated for Federal tax purposes just like stock life insurance 
companies. While this change would raise about $1.2 billion in

[[Page H5175]]

revenue over 10 years, it would have a major impact on the operations 
of TIAA-CREF's pension program.
  Revoking the tax exemption for the pension system of TIAA-CREF, 
granted by the IRS in 1920, would cause irreparable harm to higher 
education institutions, their employees, and the education and research 
community as a whole.
  The Senate Finance Committee has recognized this fact and has not 
included this provision in their version of the tax bill.
  This measure in the House Republican tax bill will impact virtually 
every public and independent college, university, and education 
research organization in the country, including 260 tax-exempt colleges 
and universities in New England, 16 of which are in my own Third 
Congressional District of Massachusetts. The next effect of revoking 
TIAA-CREF's tax exemption after 75 years would be to significantly 
reduce the earnings of current employees' retirement accumulation as 
well as the pension income of retired employees. In effect, this 
measure would increase taxes on the individuals served by TIAA-CREF by 
up to $1.5 billion and would reduce pension benefits by 3 to 5 percent. 
This would cut pension income for retired educators by $30 to $50 each 
month. Over a typical 25-year payout period, a retiree would lose as 
much as $15,000. In Massachusetts alone, 106,542 individuals would be 
affected by this provision.
  Mr. Speaker, this assault on our Nation's academic community is a 
scandal. There is no rational justification for such an attack on the 
financial and retirement security of working families who make up our 
academic and research community. With neither hearings nor public 
comment, this provision was slipped into the House Republican tax bill, 
and it is an outrage.
  Pension trusts for other American workers are entirely exempt from 
the kind of taxation embodied in the House Republican tax bill, and 
TIAA-CREF's not-for-profit pension operations are essentially 
equivalent to those of a multiemployer pension trust.
  Unlike for-profit commercial insurance companies, TIAA-CREF's pension 
assets are exclusively used for the benefit of pension participants. 
Its pension reserves can be used for no other purpose than to support 
participants' retirement benefits. In addition, since 1986, TIAA's 
nonpension insurance business is already subject to taxes.
  TIAA-CREF has been widely lauded as a model of pension portability. 
Not only does it provide the advantages of a fully funded, fully 
portable retirement plan, TIAA-CREF provides benefits in the form of a 
lifetime annuity. Some would argue that public policy should encourage 
this type of pension model, not penalize it.
  TIAA-CREF provides pensions to those who dedicate themselves to 
education, despite the relatively modest salaries available in the 
field. By imposing this unprecedented tax, the House Republican tax 
bill would not only undermine the recruitment and retention of men and 
women in teaching professions, but would significantly undercut efforts 
by the Congress and by the President to improve educational quality and 
opportunities for America's young people.
  I have expressed my concern over this measure in the House tax bill 
to President Clinton and to the House and Senate conferees. If 
education is truly to be America's priority as we head into the 21st 
century, then we must support, not undermine, the economic security of 
our hard-working and modestly rewarded academic and research workers.
  There are many other taxes affecting students, faculty, and academic 
staff in the House Republican tax bill that concern me very deeply, and 
I have also brought these to the attention of the President and the 
House and Senate conferees. I hope these education taxes can be 
remedied in the conference.
  It is both cynical and dishonest for Congress to claim to be 
committed to tax relief while raising taxes on the hard-working members 
of our academic community.
  I call upon my colleagues to support efforts to remove these ill-
advised and ill-considered provisions from the tax bill in the 
conference. I want to commend and salute the gentlewoman from Maryland 
(Mrs. Morella), who has circulated a letter to her House colleagues on 
TIAA-CREF and other education tax issues. I hope most of my colleagues 
will join in that effort.
  Mr. Speaker, I submit for the Record an article from the July 8 
edition of the Boston Globe.

                 [From the Boston Globe, July 8, 1997]

           GOP Unleashes a Sneak Attack on Teachers' Pensions

                          (By Robert Kuttner)

       The Republicans want to cut taxes for nearly everyone. But 
     they've finally identified a group whose taxes they don't 
     mind raising--retired teachers.
       The House tax bill would repeal the tax exemption of the 
     nation's largest pension plan--TIAA-CREF. The $195 billion 
     nonprofit company manages pensions for most college teachers 
     and retirees from other nonprofit organizations.
       The surprise measure, unveiled at a June 9 press conference 
     by Representative Bill Archer of Texas, chairman of the House 
     Ways and Means Committee, and passed by the full House, was 
     never the subject of hearings. It would levy $1.2 to 1.5 
     billion in taxes on TIAA-CREF over 10 years, thereby reducing 
     pension income for members by an estimated 3 to 5 percent.
       Why TIAA-CREF? There are several theories. For one thing, 
     college professors are a bunch of pointy-headed liberals. 
     Their unions tend to support Democrats. The House bill 
     targets two other tax benefits for educators. It would end 
     the tax-free status of tuition scholarships for graduate 
     students and for children of professors.
       More concretely, key staffers to Archer don't like TIAA-
     CREF, which has been tax-exempt since 1918. In the 1986 tax 
     reform bill, which required some nonprofits to pay some tax, 
     Congress voted to tax profits on the life insurance that 
     TIAA-CREF sells but to retain the tax-exemption on its core 
     activity annuity plans for teachers.
       However, Ken Kies, chief of staff to the congressional 
     Joint Tax Committee and a key Archer adviser, has long 
     believed that TIAA-CREF should be taxed like a commercial 
     company.
       Other likely culprits are TIAA-CREF's for-profit rivals. A 
     Houston commercial insurance outfit based in Archer's home 
     town, the Variable Annuity Life Insurance Co., competes 
     directly with TIAA-CREF. VALIC's chairman recently told a 
     trade paper that ending TIAA-CREF's tax exemption was ``long 
     overdue.''
       VALIC's corporate parent, the American General Group, is an 
     Archer campaign contributor and gave $115,000 in soft money 
     to the Republican National Committee. More broadly, the 
     organized right has lately mounted an attack on large 
     nonprofit institutions, painting them as unfair competitors 
     to tax-paying entrepreneurs.
       The irony is that TIAA-CREF efficiently serves a goal that 
     has long eluded most working Americans and policy makers--
     fully portable pensions. Roughly half of US workers are in 
     some pension plan (the fraction is dropping). But pension 
     contributions are lost if a worker frequently changes jobs.
       A 1974 reform, the Employee Retirement Income Security 
     Act--ERISA--requires that workers' pension credits be vested 
     (locked in) once they have five years of credit with an 
     employer. But ERISA does not make pensions fully portable.
       TIAA-CREF was created precisely to solve this problem for 
     educators and researchers. Teachers often have itinerant 
     careers. Thanks to TIAA-CREF, educational institutions pay 
     into a common pool so that all pension credits count. TIAA-
     CREF has long been a model for legislators seeking 
     universally portable pensions.
       The only other Americans with truly portable pensions are 
     workers, mostly in construction trades, who participate in 
     common pension plans jointly controlled by companies and 
     unions under the Taft-Hartley act; and most state and local 
     employees, who are typically members of an umbrella pension 
     system within the civil service. But Archer is not proposing 
     to tax the pension plans of construction workers and public 
     employees.
       The Senate tax bill has no TIAA-CREF provision, and it 
     remains to be seen which version will prevail. The Clinton 
     administration has not made the issue a priority.
       There is one other smelly aspect of this affair. For a 
     decade or so, after the Watergate reforms. Congress conducted 
     most business in public. In the late 1970s, committee ``mark 
     up'' sessions, where bills were drafted, were generally open.
       Since the 1980s, a new custom has crept in. The committee 
     chairman and senior staff simply write the bill in private. 
     They unveil it all at once and count on party discipline to 
     carry it through.
       This secretly drafted bill is pretentiously called the 
     ``chairman's mark,'' a term redolent of bourbon, smoke-filled 
     rooms, and raw power. The tax on TIAA-CREF materialized from 
     nowhere in Archer's June 9 ``chairman's mark.''
       It would be salutary not just to bury this sneak attack on 
     teachers' pensions. Congress should write a rule that no 
     measure can be approved by a committee for floor debate 
     unless it was the subject of prior hearings. But don't hold 
     your breath. Republicans are now the majority, and it's 
     payback time.




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