[Congressional Record Volume 148, Number 127 (Wednesday, October 2, 2002)]
[Senate]
[Pages S9847-S9848]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SESSIONS (for himself, Mr. Leahy, and Mr. Grassley):
  S. 3028. A bill to provide for a creditors' committee of employee and 
retiree representatives of a debtor in order to protect pensions of 
those employees and retirees; to the Committee on the Judiciary.
  Mr. SESSIONS. Mr. President, I rise today to introduce the Employee 
Pension Bankruptcy Protection Act of 2002. Today, when a company 
declares bankruptcy, it is often the employees and retirees who suffer. 
They suffer because they often lose their hard earned pensions and 
retirement benefits during the bankruptcy process. This is simply not 
right. When Americans lose the pensions and benefits that they have 
worked a lifetime to earn, it is the responsibility of the members of 
this body to act to protect them.
  Under current law, the pension fund is technically the ``creditor'' 
of the corporation, not the employees and retirees. Thus, in court, 
employees and retirees of a bankrupt corporation have their interests 
in their pensions represented by the pension plan trustee. If the 
pension fund itself is threatened with insolvency, the Pension Benefit 
Guaranty Corporation, PBGC, can step in. While PBGC often covers most 
of the pension obligation, the statutory limits can sometimes leave a 
significant amount of pension benefits unpaid. If employees and 
retirees are not satisfied with how the pension plan trustee or PGGC is 
representing their interests, current law provides no relief. There is 
no day in court for the people who earned the pensions in the first 
place.
  This problem has only recently been brought to my attention by Mr. 
John Nichols of Gadsden, AL, and his son, Phil, an attorney in 
Birmingham. The orderal faced by Mr. Nichols is a prime example of why 
employees and retirees need more representation before the bankruptcy 
court. Mr. Nichols spent his entire career at a steel plant in Gadsden. 
He began working for Republic Steel in 1956 and stayed with the 
operation through a buyout by LTV Steel and two subsequent ownership 
changes.
  When LTV bought out Mr. Nichols' employer, LTV Steel took over the

[[Page S9848]]

monthly pension payments guaranteed to the former employees and 
retirees of Republic Steel, including Mr. Nichols. Soon after the 
takeover, however, LTV filed for bankruptcy, claiming that it could no 
longer make pension payments to Republic Steel's former employees. 
PBGC, initially stepped in to help make a small part of the pension 
payments, but LTV eventually stopped making payments at all.
  Because all the payments LTV had been making were not guaranteed by 
the PBGC, the long awaited pension payments earned by Mr. Nichols and 
by Republic Steel's other loyal employees were severely reduced. Mr. 
Nichols' pension payments went from approximately $2,225 per month to 
approximately $675 per month--only 30 percent of what he had been 
promised. A third of this payment now covers Mr. Nichols' health 
insurance premium that he can no longer purchase through LTV, leaving 
him with only 20 percent of his promised pension each month.
  Because PBGC could only pay the retirees the amount the statute 
allowed, and because no one had the responsibility of telling 
bankruptcy court what was happening to the retirees of Republic Steel, 
large portions of hard earned pensions were lost. PBGC itself 
recognized that the claims of the pensioners against LTV, ``are among 
the many claims that will probably never be paid, except perhaps in 
cents on the dollar'' and stated that PBGC's claims against LTV for the 
pension plan underfunding were perhaps ``[t]he largest of these claims 
[that will go upaid].''
  During LTV's bankruptcy case, various creditors were represented 
before the bankruptcy court, but not the employees and retirees. Thus, 
when the assets of LTV were divided among its creditors, employees and 
the retirees were not at the table. If the employees and retirees had 
had an opportunity to make their case before the bankruptcy judge, the 
result could have been different for Mr. Nichols and for the other 
employees of Republic Steel.
  The bill I introduce today does one very simple thing, it gives 
employees and retirees the right to be heard before the bankruptcy 
court with respect to their pensions. Under this bill, a representative 
of the employee and retirees can appear and be heard if it is likely 
that the employee benefit pension plan of the bankrupt corporation will 
be terminated or substantially underfunded and if it is possible that 
the beneficiaries of the plan will be adversely affected.
  By allowing employees and retirees to be hard before the bankruptcy 
court, we will ensure that the bankruptcy court hears from the people 
who earned the pensions before it disposes of the assets that could pay 
those pensions. Employees and retirees will be able to argue to the 
court that any division of assets or bankruptcy plan must be fair to 
the pensioners. The needs of the corporation's employees and retirees 
should be heard before the assets of a bankrupt corporation are split 
up among creditors and gone forever. They deserve to have their day in 
court.
  The Employee Pension Bankruptcy Protection Act of 2002 seeks to make 
sure that what happened to the retirees of Republic Steel in Gadsden, 
Alabama, will never happen again. By passing this legislation we can 
ensure that employees and retirees will never be deprived of their 
pensions without having their day in court. While a company may still 
be able to discharge its obligation to pay pensioners in bankruptcy, 
this bill at least takes the first modest step to protection pensions 
by providing them the opportunity to be part of the bankruptcy 
bargaining process. Before the bankruptcy court sells assets or adopts 
a plan of reorganization, the employees and retirees will be heard with 
respect to their pensions. This is only fair.
  I strongly urge my colleagues in the Senate to support this bill and 
to work with me to further ensure that employees and retirees of 
corporations are fairly treated and protected under the United States 
Bankruptcy Code.
                                 ______