must have a certain minimum pension which could not otherwise be provided with the dollars available unless they did deny the right to obtain benefits to some of the people.

Mr. DENT. Yes; I know it sounds fine for the person getting the benefits, but what about a situation with which I am familiar? Thousands upon thousands of transient workers are paying into this fund. Some of them work in and out of the particular industry for 30 or 40 years, with as much employment as those who participate in the plan and yet only a handful will ever receive a benefit.

Mr. VAN DEUREN. One of the things that is happening-and, to be sure, you may say it is not happening fast enough-but one thing which is happening with a great deal of effectiveness is that plans such as you are describing, are now adopting reciprocity agreements which, in effect, prevent forfeiture of the benefits.

In the recent 2 years, with regard to two unions whose plans we worked with, more than 1 million employees are being brought under reciprocity agreements or under national coverage just to account for that very problem. So labor and management are not completely irresponsive to these needs.

Mr. DENT. Isn't it true also from your experience that many of the so-called jointly managed pensions were negotiated between employer and employee and in many instances the employee representative had absolutely no knowledge whatsoever of what a pension should be or should not be, what it should require or not require. Because they were made at a time when law did not allow limited. pay increases, so this was something over and above the pay increase as a fringe benefit?

Mr. VAN DEUREN. Historically, I am sure it is true. Labor has been very effective in recent years in learning the ropes.

Mr. DENT. A lot of them are being amended.

Mr. VAN DEUREN. Absolutely. To make a good point, I would say this: I don't know of a single negotiated plan where, when the labor trustees have said "We want to get vesting now" they have not been able to accomplish this, and I think it is in part, because organized labor is doing a better job of making its people aware of the consideration affecting these issues.

Mr. DENT. Mr. Erlenborn.

Mr. ERLENBORN. Thank you, Mr. Chairman and Mr. Van Deuren; I am sorry I had to leave during your testimony. The portion I heard was excellent.

I was just wondering, myself, if maybe we should not try this vesting and funding on a trial basis. Perhaps we could apply it first to the United Mine Workers welfare and pension fund and see how it works. Or maybe, as an alternative, give the miners the right to bargain for benefits. It seems to me they don't even have that right. Mr. DENT. They got them without bargaining lately.

Mr. ERLENBORN. They seem to fluctuate up and down at will. I do appreciate what I consider to be an excellent contribution from you, Mr. Van Deuren, and I look forward to reading the rest of your statement. I have no further questions.

Mr. VAN DEUREN. If I may make one other comment, with one international union recently, we conducted a session for labor leaders

throughout the country. This union formed an advisory council because it had a lot of criticism about the omission of certain kinds of benefits from the plan.

So we brought people in from throughout the country and discussed who wanted what benefits and then attached dollar signs to them. The people got themselves involved in the process of having to decide where they would spend the pennies of increase they were going to get.

Perhaps more attention to the implications of that cost-choice syndrome would be desirable, because when those decisions were made, in that context they didn't always uniformly say "We want more funding," or "We want more vesting," Even after being advised of the opportunities for vesting or funding, the kind of choices they made were different. Perhaps the number one interest was in providing joint survivor benefits before faster vesting or funding.

What I am trying to point out is, once the leadership became. knowledgeable and began decisionmaking in the cost-choice context their decisionmaking was not consistent with what we expected or with putting the vesting or funding at a priority.

Mr. DENT. It would be interesting to know the age of the negotiators at the time they were negotiating; they might have been ready to pick up the check.

Does your organization cover pension funds as well as profit-sharing plans, or do you stay strictly with pension plans?

Mr. VAN DEUREN. Anybody who has a profit-sharing plan is entitled to participate. I think the level of interest is greatest among those with pension plans.

Mr. DENT. Do you have profit-sharing?

Mr. VAN DEUREN. Yes.

Mr. DENT. Is there anything such as a profit-sharing plan and pension plan in any of the companies you represent-both of them? Mr. VAN DEUREN. Yes.

Mr. DENT. Has there ever been any consideration given at your meetings of your executives of the national group you represent of the impact of the private pension plans on Social Security?

Mr. VAN DEUREN. Officially, no, it has never been discussed. Informally, I had conversations with others on it, yes.

Mr. DENT. Have you run into any suggestions along the line anywhere we might be heading into some kind of head-on collision between those who receive two pensions when 60 or 65 and those receiving one, living close to each other, next door?

Mr. VAN DEUREN. Yes, sir; there are many. Of course, you know there is a view on funding which draws an interesting distinction between profit and pension.

Mr. DENT. There is also the view that we ought to take a more serious look at the question of whether or not there might be future trouble when 50 percent of the workers of the country are retired with a dual pension and the other 50 percent retire on a Social Security payment that has been kept down because of the fact that the other 50 percent of the employees in this country don't care whether the social security plan goes up so much as they do whether or not their private pension plan goes up. That might be a serious situation.

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Now to sum up, Mr. Van Deuren, do you see any real obstacles to some kind of minimum requirement of vesting and funding and issuance of funds?

Mr. VAN DEUREN. Yes.

Mr. DENT. You do?

Mr. VAN DEUREN. Yes.

Mr. DENT. Strictly on the basis of what? Is it cost?

Mr. VAN DEUREN. Strictly on the basis of the fact I don't think we have sufficient information to make an intelligent judgment at this point in time. I think it is even more applicable with insurance than with regards to vesting and funding.

Mr. DENT. I am going to send you the debates on deposit insurance. The argument at that time was that the moment in time was not proper; we had to make a massive study.

Mr. VAN DEUREN. I am aware, and I made that argument before. Mr. DENT. And Congress cannot make these studies because of the simple reason we change horses every 2 years and the fellow that comes in doesn't want to ride the same horse as the fellow before. The next Congress will say we need a new study. But there has been a great deal of study, and you yourself say a study was made by the Wharton School, probably the best in the field, on cost of these funds, which is not conclusive. How long did it take them?

Mr. VAN DEUREN. Just so I clarify my remark, I said I did not think everyone would want to rely upon it, so that is why I suggested this.

Mr. DENT. What gives you the idea that everyone or anyone would rely on a study made by Congress?

Mr. VAN DEUREN. I am quite sure you are right.

Mr. DENT. I am very grateful to you for your very frank observations, and we have at least received a couple of views this morning. Now, the purpose of this hearing was really to advise all of those interested in pension funds around the country-that this committee is taking a look not only at tightening up the fiduciary responsibilities, and other matters set out in 1046 but in going into the question of whether or not we can establish some kind of base for uniformity all over the country on vesting, funding, and insurance and whether or not an employee may be able to move from one employer to another without losing whatever benefits he may have been building up in previous employment. This is merely the kick-off hearing-the beginning of many days of hearings, study and investigation.

Thank you for your testimony, and we thank all of your for coming.

(Whereupon, at 12:30 p.m. the subcommittee adjourned sine die.)

PRIVATE WELFARE AND PENSION PLAN LEGISLATION

THURSDAY, FEBRUARY 26, 1970

HOUSE OF REPRESENTATIVES,

GENERAL SUBCOMMITTEE ON LABOR

OF THE COMMITTEE ON EDUCATION AND LABOR

Washington, D.C.

The subcommittee met at 10 a.m., pursuant to notice, in room 2261, Rayburn House Office Building, Hon. John H. Dent (chairman of the subcommittee) presiding.

Present: Representatives Dent, Pucinski, Gaydos, Ayres, Erlenborn, Ashbrook, and Landgrebe.

Also present: Representatives O'Hara and Collins.

Staff present: Robert E. Vagley, director, General Subcommittee on Labor; Thomas J. Hart, majority staff member; and Michael Bernstein, minority counsel for education and labor.

Mr. DENT. The General Subcommittee on Labor will now come to order for the purposes of hearing witnesses on H.R. 1045 and H.R. 1046, and related bills on private welfare and pension plan legislation.

This morning we are very privileged to have a man who has long been associated with pension and welfare problems, who is an innovator in this type of legislation, and who has an outstanding record in the labor field. We are happy tto have and welcome this morning, Mr. Walter Reuther, President of the United Automobile Workers of America.

STATEMENT OF WALTER REUTHER, PRESIDENT, UNITED AUTOMOBILE WORKERS OF AMERICA AND W. E. SOLENBERGER, ASSISTANT DIRECTOR, UAW SOCIAL SECURITY DEPARTMENT AND PRINCIPAL CONSULTANT ON PENSIONS

Mr. REUTHER. Thank you, Mr. Chairman, and other members of the committee.

I come here this morning as president of the UAW and I speak for 1,700,000 wage earners throughout the United States who are employed principally in the automative and the agricultural implement industries and the aerospace industries and the related industries that tie into those basic industries.

I have with me Mr. Willard Solenberger, assistant director of the Social Security Department of the UAW and who is our principal consultant on matters of pensions.

I might say that the tremendous progress that we have made in the UAW would not have been possible without the extreme contribution and great help that he has given us in the past 20 years when we have been working on pensions.

I appreciate the opportunity of appearing before your committee when you are giving consideration to H.R. 1045 and 1046 because the UAW has been supporting the essential purposes and objectives of those two bills for the last 10 years. And there is a growing interest on the part of the rank and file members of our union, and I think the American labor movement generally, in the need for some mechanism through the instruments of legislation to protect workers where their plants go out of existence or for other reasons their pension plans are terminated.

I have just a small indication of that growing interest. I have here 75,000 signatures which have been collected in the past few weeks in 17 States where workers in effect are signing petitions, calling upon the Congress to deal with this very serious and very urgent problem.

And I would like, Mr. Chairman, to express our very sincere and deep appreciation for the leadership which you have personally provided in this critical area.

And I think that the American wage earners, who are hoping that Congress will find an answer to this urgent human problem, deeply appreciate the leadership you are providing.

Over the years, we have been urging-I think it has been more than 10 years ago that we first advanced the proposition that it would require legislation of the type that we use to protect people's bank deposits, to deal with the problem of protecting wage earners' pensions if and when their plans terminate without the financial capability of carrying out the commitments that those pension plans made to workers.

And so we fully support the objectives and the principles of the first of these two bills in providing for the establishment of a Federal insurance system to protect workers when pension plans termi

nate.

We also support the legislation that will require minimum standards of both funding and vesting because we believe that both funding and vesting are essential principles if we are going to make pension plans into fully responsible social instruments that will provide workers with security and dignity during their retirement years. We also subscribe to and support the principles that would bring about and define and enforce the highest possible standards of fiduciary responsibility on the part of those people who have what we think is a sacred trust, the management of the pension funds out of which workers have a right to expect their security.

Mr. Chairman, before I get into the specifics of these two bills, I would like to say a few words about the broad context in which we are working in America; where we are and what I think some of our problems are, because America cannot solve any of its urgent problems in isolation.