[Congressional Record Volume 150, Number 130 (Monday, October 11, 2004)]
[Extensions of Remarks]
[Pages E1892-E1893]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      PENSION FAIRNESS ACT OF 2004

                                 ______
                                 

                           HON. GEORGE MILLER

                             of california

                    in the house of representatives

                        Friday, October 8, 2004

  Mr. GEORGE MILLER of California. Mr. Speaker, today I have introduced 
the Pension Fairness Act to bring some equity to bear between corporate 
executives and rank-and-file workers when those executives seek to dump 
underfunded workers' pension plans onto the Federal Government or cut 
older workers' pensions through an unfair cash balance plan conversion.
  Far too often, we hear of cases where executives demand concessions 
from their workers when the business struggles and, at the same time, 
sweeten their own pension and deferred compensation deals. It's past 
time that executives understand that the pension promises made to their 
workers are sacred. It's past time that executives understand that a 
breach of those promises carries consequences. Employees cannot be 
asked to absorb the full brunt of bankruptcy by having their pension 
plans terminated and dropped on the Federal Government. Executives 
should share in that pain.
  When companies terminate their underfunded pension plans, the 
federally established Pension Benefit Guaranty Corporation (PBGC) takes 
over those liabilities. Today, the PBGC suffers from a $10 billion 
deficit. Already in bankruptcy, United Airlines, which recently defied 
the law and stopped making legally-required contributions to its 
pension plans, would add $6.4 billion to the PBGC's obligations if the 
company terminates its plans. United's workers and retirees would lose 
$1.9 billion in earned pension benefits. US Airways has asked a 
bankruptcy court for permission to skip a $110 million contribution to 
its pension plans, due last month. Plan terminations at these companies 
would pose serious threats not just to the retirement security of their 
employees but to the retirement security of other airlines' employees 
and to the ongoing solvency of the PBGC. When executives are faced with 
the choice between terminating or saving company pension plans they 
also should have a stake in that choice.
  In recent years, we have seen companies break their pension promises 
by converting their traditional pension plans into cash balance plans. 
Many of these conversions do wonders for a company's books--to the 
great delight of executives and directors--but end up cutting older 
workers' pension benefits. Many of these conversions have given workers 
no choice between the cash balance and traditional pension plans. Just 
last year, a court found that the cash balance conversion at IBM, which 
all employees were forced to take, would result in a 47 percent 
reduction in older workers' pensions. The Government Accountability 
Office found similar losses of up to 50 percent of older workers' 
promised pensions.

[[Page E1893]]

  Under the Pension Fairness Act, if a company terminates an 
underfunded workers' pension plan or converts a workers' pension plan 
into a cash balance plan that cuts older workers' benefits or takes 
away their choice to stay in their original plan, the company's 
executives and directors may not enhance their own deferred 
compensation deals for the next 5 years. If any new deals for 
executives or directors are cut the year prior to an underfunded plan 
termination or a conversion that hurts older workers, payments to 
executives or directors under those new deals are also suspended for 5 
years. It's very simple: If the business or the pension plan is in such 
dire straits that a termination or conversion is necessary, then 
executives and directors should not be showering themselves with new 
and improved benefits.
  This bill is about fairness and common sense. It places the 
retirement security of workers and executives on more equal footing. 
And it sends a rightly discouraging message to those executives who 
would seek to cut and run from their pension promises, leaving the 
federal government to pick up the tab.

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