[Congressional Record Volume 143, Number 111 (Thursday, July 31, 1997)]
[Senate]
[Pages S8566-S8567]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. COCHRAN (for himself and Mr. Conrad):
  S. 1105. A bill to amend the Internal Revenue Code of 1986 to provide 
a sound budgetary mechanism for financing health and death benefits of 
retired coal miners while ensuring the long-term fiscal health and 
solvency of such benefits, and for other purposes; to the Committee on 
Finance.


                 the comprehensive coal act reform act

  Mr. COCHRAN. Mr. President, today I am introducing legislation which 
will correct the abuses of Federal tax policy associated with the 
Reachback Tax provisions of the Coal Industry Health Benefit Act of 
1992 (the Coal Act), while guaranteeing the solvency of the Combined 
Benefit Fund established by that Act.
  The legislation will also guarantee retiree health care benefits to 
approximately 75,000 retired unionized bituminous coal miners, their 
spouses or widows, and dependents. These coal mine retirees have 
received uninterrupted health care benefits which are among the best 
available to any group of retirees.
  The Coal Act also bestowed a windfall on one class of companies at 
the expense of another class, by shifting 62 percent of the cost of 
these retiree health benefits from the companies which had contracted 
to pay for them. Those costs are now shouldered by Federal transfers 
and private employers, who had no contractual obligation for retiree 
health care.
  Since its passage as part of the National Energy Policy Act, the Coal 
Act has been the subject of debate in both houses of Congress and tens 
of millions of dollars has been spent on litigation filed in the 
Federal courts by companies subjected to its retroactive taxation. 
Every case has been lost, however, as the courts have ruled that 
Congress has the power to tax and that it is up to Congress to make or 
change tax law.
  Mr. President, this confiscatory measure is called the Reachback Tax, 
because it reached back, over the decades and branded for taxation 
hundreds of companies, or their former owners. Many of those companies 
had been out of the unionized coal business for decades. Many 
identified by the Social Security Administration as liable for 
Reachback Taxes, are nothing more than skeletons of business entities 
holding the dwindling assets of former small enterprises.
  Some reachback companies were taxed because they, or a related party, 
had signed a UMWA multi-employer contract sometime between 1950 and 
1988. When the contracts expired, however, each of the reachback 
companies had fulfilled its obligations to the union and the union 
members. There were no continuing ties between the reachback companies 
and former employees, and certainly no promises of lifetime benefits to 
those former employees, much less their dependents. Furthermore, the 
union had no claims pending against these companies for retiree health 
care.
  Mr. President, the Reachback Tax, passed without benefit of hearings 
or debate, has brought economic disaster to hundreds of innocent 
American companies, and hardship for tens of thousands of their 
workers. It has caused a favored class of companies to receive what 
they admit is a $130 million annual savings in retiree health benefit 
costs, and transferred that burden to companies--small and large in 
more than 30 States.
  The payment of this Federal tax is an unfair burden on all of the 
reachback companies. For every beneficiary assigned, the reachback 
companies have a liability of approximately $2,400 per year, stretching 
to the year 2043. No reachback company was prepared to absorb such an 
expense, nor should it have been. Obviously, jobs have been lost and 
job-creating projects have been delayed or canceled, and new

[[Page S8567]]

products and the opening of new markets have been sidetracked because 
of the Reachback Tax.
  When the 102d Congress passed the Reachback Tax in the fall of 1992, 
it handed the UMWA Combined Fund Trustees the statutory responsibility 
to collect every cent of every premium due from every reachback 
company. It also conferred on the Department of Treasury and the 
Internal Revenue Service the statutory responsibility to impose $100 
per day, per beneficiary penalties on every reachback company which 
does not pay those premiums. Furthermore, the Department of Treasury's 
Office of Tax Policy reports non-paying reachback companies are liable 
for billions of dollars in penalties.
  Mr. President, billions of dollars are due the United States 
Treasury, yet the Treasury and IRS have not moved to collect these 
penalties. And, despite this financial threat, some 60 percent of all 
the reachback companies have ignored their statements, unwilling or 
unable to comply with a Federal law they view as unjust.
  Mr. President, the Reachback Tax was promoted during the conference 
on the Energy Act as an emergency effort to avoid an advertised deficit 
in the UMWA health benefits fund, and as necessary to save the retirees 
from an imminent suspension of health care benefits. However, the 
deficit never materialized. Instead, the General Accounting Office, the 
private firms Towers Perrin, Deloitte & Touche, and the UMWA Combined 
Benefit Fund trustees have confirmed a huge surplus in the fund.
  The legislation I am introducing today will statutorily guarantee 
that those surpluses continue through the life of the fund, as several 
new and permanent cost containment measures by the fund managers have 
dramatically lowered its expenses below original projections. 
Furthermore, the number of beneficiaries in the closed pool continues 
to decline because of mortality.
  Statutory relief is the only relief available to these reachback 
companies. It is needed immediately. I urge Senators to join in support 
of this legislation to mitigate an unintended impact of well-intended 
legislation.
  Mr. CONRAD. Mr. President, I am pleased to join Senator Cochran in 
sponsoring this reachback tax relief bill to alleviate the inequitable 
hardships the Coal Industry Retiree Health Benefits Act of 1992 imposed 
on certain companies.
  First, it is important to note that the Coal Act of 1992 assured coal 
miners and their dependents that their health benefits were permanently 
secured. And, it provided a statutory foundation to implement that 
commitment. This legislation continues that commitment and maintains 
the legal foundation to carry it out.
  However, the funding mechanism of the Act has produced severe 
financial hardship for many companies subject to it. Our legislation 
reforms the Coal Act to eliminate this very serious and growing 
problem. In order to fund the 1992 Coal Act, reachback companies, many 
long removed from deep coal mining, were subjected to a burdensome tax 
that in many cases threatens their existence. Many companies are no 
longer in the coal business, and long ago withdrew from the Bituminous 
Coal Operators Association [BCOA] having met their legal obligations to 
fund retiree health benefits. It is the BCOA that negotiated a series 
of collective bargaining agreements with their employees and at the 
urging of the BCOA, the final contract contribution formula did not 
fully fund the benefits. The solution to this funding shortfall came 
down to asking others to help pay, even those who had long ago left the 
coal business.
  We have now reached a point where reform is essential. As much as $16 
billion in penalties have accumulated against companies for delinquent 
premiums. Some of the reachback companies are trying to pay by 
depleting their assets and thereby jeopardizing their ability to 
survive economically. Other companies simply cannot afford to pay. The 
Combined Benefit Fund trustees are currently suing delinquent companies 
to collect all unpaid premiums. These liabilities threaten the 
existence of many small companies and the jobs of the people employed 
by them. It is increasingly clear that this is a symptom of the serious 
shortcomings in the original legislation. These reachback companies 
deserve fairer treatment than the Coal Act now provides. Just as 
important, coal miners and their dependents deserve a Coal Act that 
will work in the long-run.
  To make matters worse, a recent federal court decision has had the 
adverse effect of reducing the Combined Fund revenues by ten percent 
and thus threatening the solvency of the Fund. If the decision is left 
standing, a shortfall is projected by the year 2002. We must act now to 
preserve the solvency of the miners' fund as well as provide the 
urgently needed reachback relief. This legislation reverses the court's 
decision and increases BCOA premiums, to preserve the long term 
solvency of the Fund and provide a modest level of reachback relief. 
Following are key reform elements in our legislation:
  (1) Eliminates premiums for certain reachback companies and 
significantly reduces premiums for other reachbacks;
  (2) Creates a cap on all small company premiums;
  (3) Creates relief for companies who paid withdrawal fees; and
  (4) Strengthens the fiscal integrity of the miners' fund by 
overturning the court decision and increasing BCOA premiums.
  The passage of the Coal Act in 1992 has saved the coal producing 
members of the BCOA more than $130 million per year over their prior 
annual benefit payment liabilities. The BCOA companies' $130 million 
annual windfall will need to be reduced in order to provide fiscal 
relief to the many reachback companies. When this comprehensive bill 
becomes law, BCOA companies will still benefit from about $100 million 
in annual savings.
  Mr. President, the problems being caused by the Reachback Tax are 
severe and require a remedy. Congress should act now to reform the Coal 
Act in order to provide equitable relief for all reachback companies as 
well as to permanently secure the miners' benefits. We should pass the 
Comprehensive Coal Act Reform proposal now.
                                 ______