[Congressional Record Volume 149, Number 56 (Tuesday, April 8, 2003)]
[Senate]
[Pages S4973-S4974]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HARKIN (for himself, Mr. Durbin, Mr. Feingold, Mr. 
        Kennedy, and Mrs. Boxer):
  S. 825. A bill to amend the Employee Retirement Income Security Act 
of 1974 and the Internal Revenue Code of 1986 to protect pension 
benefits of employees in defined benefit plans and to direct the 
Secretary of the Treasury to enforce the age discrimination 
requirements of the Internal Revenue Code 1986; to the Committee on 
Health, Education, Labor, and Pensions.
  Mr. HARKIN. Mr. President, in the early 1990s, a large number of U.S. 
companies began a process of switching their defined benefit pension 
plans to cash balance plans. Many of the employees whose pension plans 
were to be altered drastically weren't told and didn't notice that they 
were essentially going to be working for years without earning any more 
benefits. Their not knowing was viewed as a key benefit by management. 
And the retirees were furious.
  As Keith Williams with Watson Wyatt Worldwide and Amy Viener with 
William Mercer, two firms that put together these plans in 1998 said at 
an Actuaries conference:

       Mr. Williams: I've been involved in cash balance plans five 
     or six years down the road and what I have found is that 
     while employees understand it, it is not until they are 
     actually ready to retire that they understand how little they 
     are actually getting.
       Ms. Viener: Right, but they're happy while they're 
     employed.

  One of the most abusive practices in cash balance conversions is 
known as ``wear away.'' Older workers see nothing added to their 
pensions as the value of the pensions is frozen, often for many years, 
until it reaches the lower value of the new pension plan. At the same 
time younger workers are getting their pensions increased. In my view, 
this is clearly age discrimination and bad pension policy. In 1999, I 
introduced a bill to make it illegal for corporations wear away the 
benefits of older workers during conversions to cash balance plans. I 
offered my bill as an amendment. Forty-eight Senators, including 3 
Republicans, voted to waive the budget point of order so we could 
consider this amendment. We did not have enough votes then, but I 
believe the tide is turning.
  After that vote, more and more stories came out about how many 
workers were losing their pensions. In September of 1999, the Secretary 
of the Treasury put a moratorium on conversions from defined benefit 
plans to cash balance plans. That moratorium has been in effect now for 
over three years. In April of 2000, I offered a sense-of-the-Senate 
resolution to stop this practice, and it passed the Senate unanimously.
  But last December, the Treasury decided to end that moratorium. The 
Department proposed a regulation that will allow hundreds of companies, 
many employing thousands of workers each to go forward with conversions 
that will allow for the wear-away of the current benefits of people 
across the country. This plan is breathtaking in its audacity. In a 
time when people have lost their life savings to market downturns and 
corporate duplicity, they are looking at changing the rules so that 
employers can once again bolster their bottom line by shifting funds 
from the pensions they promised their workers. I will not stand by and 
let it happen.
  There are over 800 age discrimination complaints currently pending 
before the EEOC based on cash balance conversions. How many more will 
there be if we again start allowing companies to make these abusive 
conversions?
  I want to make it very clear: I am not opposed to all cash balance 
plans. Some cash balance plans can be very good. What I oppose is the 
unilateral decision of a company being able to change their plans and 
stop contributing to older employees' pensions while benefits are given 
to newer employees.
  That is what this issue is all about. It is fairness. It is equity. I 
know discussion of pension law can become very convoluted. But in 
essence, what some of these companies have been doing to these workers 
is nothing less than sheer thievery. They are able to save millions, in 
some cases hundreds of millions of dollars, by converting their plans, 
robbing workers who have been loyal and hard working, robbing them of 
their rightful claims on future benefits, It is not right. It is not 
fair.
  There is one thing that has distinguished the American workplace from 
others around the world. We have valued loyalty. At least we used to. 
That is one of the reasons pension plans exist--the longer you work 
somewhere, the more you earn in your pension program. Obviously, the 
longer you work someplace, the better you do your job, the more you 
learn about it, the more productive you are. We should value that 
loyalty.
  If companies are able to wear away the benefits of the longest 
serving workers, what kind of a signal does that send to the workers? 
It tells workers they are fools if they are loyal because if you put in 
20 to 25 years, the boss can just change the rules of the game, and 
break their promise. It tells younger workers that it would be crazy to 
work for a company for a long time, that it's best to hedge your bets 
and move on as soon as it is convenient.
  This destroys the kind of work ethic we have come to value and that 
we know built this country. But some of these cash balance conversions 
counter all of that. Her is an analogy. Imagine I hire someone for five 
years with a promise of a $50,000 bonus at the end of five years of 
service. At the end of three years, however, I renege on the $50,000 
bonus. But the employee has three years invested. Had they known that 
the deal was going to be off, perhaps they would not have gone to work 
for me. They could have gone to work someplace else for a total higher 
compensation package. Is that the way we want to treat workers in this 
country, where the employer has all the cards and employees have none, 
and employers can make whatever deal they want, but can change the 
rules at any time?
  That is why I am introducing this legislation. It is simple. It says 
that you have to give older, longer serving employees a choice, at 
retirement, when their pension plan is converted to a cash balance plan 
to get the benefits earned in the old plan instead. It also says that 
employers must start counting the new cash balance benefits where the 
old defined benefit plan left off, instead of starting the cash balance

[[Page S4974]]

plan at a lower level than an employee had already earned.
  In the March 3, 2002 issue of Fortune magazine, Janice Revell said of 
the possible impending flood of cash balances conversions: ``Brace 
yourself for a very un-fairy-tale ending to this tory. Millions of 
American workers are sure to see a large slice of their retirement 
income go up in smoke. It may not happen right away, but the groundwork 
is being laid right now.''
  I urge my colleagues in the Senate to join me in cosponsoring this 
measure, so that we can stop the flood before it starts.

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