[Congressional Record Volume 144, Number 122 (Tuesday, September 15, 1998)]
[Senate]
[Pages S10384-S10386]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. D'AMATO:
  S. 2475. A bill to amend title IV of the Employee Retirement Income 
Security Act of 1974 to protect the rights of participants and 
beneficiaries of terminated pension plans; to the Committee on Labor 
and Human Resources.


            pension plan participant protection act of 1998

 Mr. D'AMATO. Mr. President, today I am introducing legislation 
to strengthen protections to retirees who, through no fault of their 
own, find themselves without a job or the pension they worked hard for 
because their company went under.
  This situation happened in 1991 when Pan Am World Airways went out of 
business leaving 45,000 employees--15,000 of which reside in New York 
State--jobless and without their promised pensions. For the last seven 
years these hardworking Americans have fought a losing battle with the 
Pension Benefits Guaranty Corporation (PBGC) to get a fair benefit 
calculation and appeals process. In addition to former Pan Am 
employees, this issue affects hundreds of thousands of former employees 
of companies whose pension plans have been taken over by the PBGC.
  Our senior citizens are a valuable resource to this country. Many of 
them are entitled to receive private pensions as a result of their 
loyal years of service to their employers. In 1974, the Employee 
Retirement Income Security Act (ERISA) was enacted to provide certain 
basic protections to retirees regarding their pensions.
  In general, private employers are required to act as fiduciaries with 
respect to most of their activities in connection with their pension 
plans. Those fiduciaries are prohibited from commingling plan assets, 
must provide regular disclosure concerning plan assets and are required 
to act ``solely in the interest'' of the participants. Participants may 
bring suit, in Federal Court, if required information is not provided 
within 30 days of request. A participant may seek a determination of 
the amount of his or her benefit, in Federal Court, if the plan fails 
or refuses to render a determination as to the amount of benefit the 
participant is entitled to receive under the plan.
  ERISA also created a Federal agency, the PBGC, to pay benefits to 
participants in pension plans who are unable to pay such benefits. PBGC 
functions as an insurer, collecting premiums from solvent plans and 
paying benefits to participants in failed plans. Since the enactment of 
ERISA, the PBGC has become the Trustee of plans involving more than one 
million participants.
  While the PBGC does an admirable job with respect to its obligations 
to continue payments to participants in terminated plans, those 
participants do not enjoy the same legal protections guaranteed to all 
plan participants under ERISA. In general, PBGC performs its functions 
as a government agency and not as a fiduciary.
  Mr. President, in plans trusteed by the PBGC, participants have no 
right to disclosure regarding the amount of their benefits and may not 
appeal an adverse determination until an appealable decision is 
rendered--which in many cases does not occur for more than ten years. 
Once issued, the PBGC decisions must be appealed within 45 days or a 
participant may lose all rights. If a determination is appealed, 
participants must follow a complicated and time consuming appeals 
process. Many of our senior citizens are confused and overwhelmed by 
this process and as a result, inadvertently surrender many valuable 
legal rights.
  In addition, under current law, the PBGC is permitted to commingle 
funds from all of the retirement plans that it terminates and may use 
those retirement funds to pay for expenses of other

[[Page S10385]]

plans as well as its general overhead expenses.
  At a minimum, our senior citizens, in plans trusteed by the PBGC, 
need and deserve the same protections accorded to every other 
participant in a plan covered by ERISA. This bill restores some of 
those protections and requires that the PBGC issue an appealable 
decision within one year of the date the PBGC becomes the Trustee of a 
plan. The bill provides for the establishment of participants' 
committees to represent the interests of the participants and permits 
such committee to serve as Trustee of the terminated plan. Where more 
than one group seeks appointment as Trustee the federal courts would be 
required to select the Trustee that would best serve the interests of 
the participants.
  My bill also establishes a participant advocates office to assist 
participants with explanations, benefits disputes and, if necessary, to 
appeal adverse determinations by the PBGC. In addition, the bill 
clarifies existing law, empowering the federal courts to remove a 
Trustee in the event the Trustee commits any breach of it fiduciary 
duty.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2475

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Pension Plan Participant 
     Protection Act of 1998''.

     SEC. 2. DUTIES OF THE PENSION BENEFIT GUARANTY CORPORATION 
                   WHILE SERVING AS TRUSTEE OF TERMINATED PLAN.

       (a) In General.--Section 4042(d)(3) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1342(d)(3)) 
     is amended--
       (1) by inserting ``(A)'' after ``(3)''; and
       (2) by adding at the end the following new subparagraphs:
       ``(B) The corporation is subject to the same requirements 
     of reporting and disclosure in connection with a pension plan 
     for which the corporation is serving as trustee pursuant to 
     this section as those of any plan administrator of an 
     employee pension benefit plan under part 1 of subtitle B of 
     title I.
       ``(C) The corporation is subject to the same fiduciary 
     duties in connection with a pension plan for which the 
     corporation is serving as trustee pursuant to this section, 
     including the determination and payment of plan benefits, as 
     those of any fiduciary of an employee pension benefit plan 
     under part 1 of subtitle B of title I. The corporation shall 
     maintain such separate books and records and retain such 
     separate counsel on its behalf as may be necessary for 
     carrying out such duties.
       ``(D) For purposes of applying part 5 of subtitle B of 
     title I in the enforcement of subparagraphs (B) and (C)--
       ``(i) any civil monetary penalty which may be assessed by 
     the Secretary of Labor against the corporation under any 
     provision of section 502(c) shall be assessed in the full 
     amount specified in such provision,
       ``(ii) a civil action against the corporation as fiduciary 
     under section 502(a)(2) for relief under section 409 may be 
     brought by any affected party, and, in any such action by an 
     affected party in which the corporation is removed as 
     trustee, the replacement trustee shall be selected by the 
     court from any list of qualified candidates which may be 
     provided by such affected party, and
       ``(iii) any review under section 502 by a district court of 
     the United States of a benefit determination by the 
     corporation shall be de novo.
       ``(E) In any case in which the corporation serves as 
     trustee for a terminated pension plan pursuant to this 
     section, the corporation shall issue its final determination 
     regarding any benefit payable under the plan not later than 
     one year after the date of the corporation's appointment as 
     trustee. Any failure by the corporation to comply with the 
     requirements of this subparagraph shall be deemed an action 
     of the corporation upon which a cause of action may be 
     brought against the corporation under section 4003(f)(1).''.
       (b) Conforming Amendment.--Section 4023 of such Act (29 
     U.S.C. 1323) is amended--
       (1) by inserting ``(a)'' after ``Sec. 4023.''; and
       (2) by adding at the end the following new subsection:
       ``(b) Subsection (a) shall not apply with respect to the 
     corporation while the corporation is serving in its fiduciary 
     capacity in accordance with section 4042(d)(3)(B).''.

     SEC. 3. PARTICIPANTS' COMMITTEES.

       (a) In General.--Subtitle C of title IV of the Employee 
     Retirement Income Security Act of 1974 is amended by 
     inserting after section 4048 (29 U.S.C. 1348) the following 
     new section:


                       ``participants' committees

       ``Sec. 4049. (a) In General.--
       ``(1) Appointment of committee.--Except as provided in 
     paragraph (3), as soon as practicable after the appointment 
     of a trustee under section 4042, the trustee shall appoint a 
     committee of participants under the plan.
       ``(2) Requests for adequate representation.--On request of 
     an affected party, the court may order the appointment of 
     additional committees of participants if necessary to assure 
     adequate representation of participants. The trustee shall 
     appoint any such committee.
       ``(3) Small businesses.--On request of an affected party in 
     a case in which the plan sponsor is a small business and for 
     cause, the court may order that a committee of participants 
     not be appointed.
       ``(b) Membership.--A committee of participants appointed 
     under subsection (a) shall ordinarily consist of the persons, 
     willing to serve, that were in pay status under the plan as 
     of the date of the termination of the plan and have the seven 
     largest nonforfeitable benefits under the plan, or of the 
     members of a committee organized by participants before such 
     date, if such committee was fairly chosen and is 
     representative of the participants of the plan.
       ``(c) Powers and Duties of Committees.--
       ``(1) Appointment of attorneys, accountants, etc.--At a 
     scheduled meeting of a committee appointed under subsection 
     (a), at which a majority of the members of such committee are 
     present, and with the court's approval, such committee may 
     select and authorize the employment by such committee of one 
     or more attorneys, accountants, or other agents to represent 
     or perform services for such committee.
       ``(2) Preclusion of conflicts of interest.--An attorney or 
     accountant employed to represent a committee appointed under 
     subsection (a) may not, while employed by such committee, 
     represent any other entity having an adverse interest in 
     connection with the case. Representation of one or more 
     participants of the same class as represented by the 
     committee shall not per se constitute the representation of 
     an adverse interest.
       ``(3) Specific powers.--A committee appointed under 
     subsection (a) may--
       ``(A) consult with the trustee concerning the 
     administration of the case,
       ``(B) investigate the acts, conduct, assets, liabilities, 
     and financial condition of the plan, the operation of the 
     plan sponsor's financial operations, and the desirability of 
     the continuance of the plan, and any other matter relevant to 
     the case,
       ``(C) participate in the formulation of the plan for 
     distribution of plan assets, advise those represented by such 
     committee of such committee's determinations as to any plan 
     for distribution of the plan's assets, and collect and file 
     with the court acceptances or rejections of the plan for 
     distribution of plan assets,
       ``(D) request the court for the appointment of the 
     committee or any other person as an alternative trustee, and
       ``(E) perform such other services as are in the interest of 
     plan participants and beneficiaries.
       ``(4) Meeting with trustee.--As soon as practicable after 
     the appointment of a committee under subsection (a), the 
     trustee shall meet with such committee to transact such 
     business as may be necessary and proper.''.
       (b) Conforming Amendment.--The table of contents in section 
     1 of such Act is amended by inserting after the item relating 
     to section 4048 the following new item:

``Sec. 4049. Participants' committees.''.

     SEC. 4. TRUSTEESHIP OF TERMINATED PLANS.

       (a) In General.--Section 4042(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1342(c)) is amended--
       (1) by inserting ``(1)'' after ``(c)''; and
       (2) by inserting before paragraph (3) the following new 
     paragraph:
       ``(2) The court may appoint the corporation, a 
     participants' committee, or any other person to serve as 
     trustee under paragraph (1). Upon the application of any two 
     or more of the foregoing to serve as trustee, the 
     determination of the court of which to appoint shall be based 
     on its determination of which applicant is most qualified to 
     carry out the fiduciary duties of the trustee with respect to 
     participants and beneficiaries without conflicts of 
     interest.''.
       (b) Payment or Reimbursement of Reasonable Fees and 
     Expenses.--Section 4042(h) of such Act (29 U.S.C. 1342(h)) is 
     amended by adding at the end the following new paragraph:
       ``(3) The reasonable fees and expenses of a trustee 
     appointed under this section (other than the corporation), of 
     any participants' committee, and of any counsel, accountants, 
     actuaries, and other professional service personnel shall be 
     paid, directly or by means of reimbursement, from the assets 
     of the terminated plan.''.

     SEC. 5. PARTICIPANT'S ADVOCATE.

       (a) In General.--Subtitle D of title IV of the Employee 
     Retirement Income Security Act of 1974 is amended by adding 
     after section 4071 (29 U.S.C. 1371) the following new 
     section:


                   ``office of participant's advocate

       ``(a) In General.--The Secretary of Labor shall establish 
     in the Department of Labor an Office of Participant's 
     Advocate, to be headed by a Participant's Advocate.
       ``(b) Functions.--The Participant's Advocate shall, upon 
     request of participants of terminated pension plans--
       ``(1) counsel participants and beneficiaries of such plans 
     in connection with their rights to benefits thereunder, and
       ``(2) provide legal representation before the corporation 
     and in court to such participants

[[Page S10386]]

     who have been denied benefits by the corporation.
       ``(b) Fees.--The Office shall require only such fees for 
     its services as may be prescribed in regulations of the 
     Secretary of Labor.
       ``(c) Staff.--The Participant's Advocate shall appoint such 
     attorneys, actuaries, and accountants as may be necessary to 
     assist the Participant's Advocate in carrying out the 
     functions of the Office, and may appoint such additional 
     personnel as may be necessary to provide adequate support for 
     the Office.
       ``(d) Notice.--Each notice of a benefit determination 
     issued by the corporation to a participant or beneficiary 
     under a terminated pension plan shall include a notice (in 
     such form as shall be prescribed in regulations of the 
     Secretary of Labor) describing the services of the 
     Participant's Advocate's Office.''.
       (b) Conforming Amendment.--The table of contents in section 
     1 of such Act is amended by inserting after the item relating 
     to section 4071 the following new item:

``Sec. 4071. Office of Participant's Advocate.''.
       (c) Effective Date.--The Secretary of Labor shall establish 
     the Office of Participant's Advocate pursuant to the 
     amendments made by this section not later than one year after 
     the date of the enactment of this Act.

     SEC. 6. RULES GOVERNING TRUSTEESHIP BY THE CORPORATION.

       (a) In General.--Section 4042 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1342) is amended by 
     adding at the end the following new subsection:
       ``(i) In any case in which the corporation serves as 
     trustee of a terminated pension plan under this section--
       ``(1) the corporation shall segregate assets of the 
     terminated plan from the assets of any other plan or any 
     other assets held by the corporation,
       ``(2) the corporation may not use any assets of the plan 
     for any purpose other than payment of benefits or reasonable 
     administrative expenses directly attributable to the 
     termination and administration of the plan, excluding any 
     generally applicable overhead expenses of the corporation, 
     and
       ``(3) the corporation shall obtain the services of 
     independent contractors in connection with the termination or 
     administration of the plan only through a competitive bidding 
     process.''.

     SEC. 7. EFFECTIVE DATE.

       The amendments made by this Act shall apply with respect to 
     plan terminations--
       (1) the termination date for which occurs on or after 
     January 1, 1990, and
       (2) for which the final distribution of assets occurs on or 
     after the date of the enactment of this Act.
                                 ______