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Mr. McCLUNG. Because a good bit of the motivation in private pension plans is to do a lot for a few and when you deny them the right to do a lot for themselves through the pension plan, they will shift over to something else which is just as good or maybe better.

Mr. DENT. I thank you very much for your frank and, I think, very helpful testimony. You have given us a completely different view than we have had to date. I do believe that it will be very helpful to the committee.

I think this problem serious enough that there ought to be a very well-funded, in-dept study.

In our type of economy $130 billion is a large amount of power in the hands of a few people.

Mr. MCCLUNG. Yes.

Mr. DENT. Is there anything you want to add?

Mr. MCCLUNG. No. Mr. Chairman. I appreciate very much having been asked to speak. I hope I have been helpful. I am aware that my argument is for solutions that exist in a context which is not available to you. That does not mean that I don't approve and support what you are doing. Yours is really very good legislation which I trust will pass.

Mr. DENT. Thank you very kindly. We hope so, too.

Without objection, a letter from A. S. Hansen, Inc., actuaries and consultants, Dallas, Tex., will be inserted into the record at this point. (The letter follows:)

Mr. JOHN H. DENT,

A. S. HANSEN, INC.

ACTUARIES AND CONSULTANTS,

Chairman, General Subcommittee on Labor,
Washington, D.C.

Dallas, Tex., April 20, 1970.

DEAR CONGRESSMAN DENT: We have been studying the actuarial implications of HR 1045 in getting ready for testimony at your hearing on May 19. It certainly seems at this point that more flexibility needs to be built into this schedule since it will tend to work a hardship on some clients, although it will work on a majority of them. However, the requirements are so rigid that it would accelerate funding for a goodly number of corporations and would undoubtedly work hardship on them if such schedule were to be insisted upon.

I suppose what is badly needed in the entire field is a study of the whole question of benefit levels, funding practices, vested liabilities, assumptions used by various and sundry actuarial firms and corporations, and a total picture of what is the common practice in the United States today in the field of pension plans.

It may be of interest to you that we have undertaken such a study for the United States Treasury Department and will finish a survey that we think will be the most complete of its kind undertaken in this country, and brought to completion. This should give us a basis for understanding some of the needs that you see in your bill for vesting, reinsurance, and funding practices and should demonstrate rather conclusively what the common practice is in this country and what, in fact, happens along the lines of new, maturing and matured funds, because our practice runs the gamut of these situations. We have been in business since 1930 and so we have watched the pension field grow from its youth to its present status.

Perhaps the results of this study will be interesting to your committee and we would certainly be willing to furnish and to discuss the results with you. For the above reasons, it may be well that we postpone our testimony on May 19 until your committee reconvenes later this year. In the meantime,

as the results emerge from our study, that seem pertinent to your bill, we will send these on to you for your information and your guidance.

With best regards.

Very truly yours,

WILLIAM N. BRETT, JR.,

Vice President.

Mr. DENT. We are recessed until 10 tomorrow. (Whereupon, at 12:15 p.m. the subcommittee recessed, to reconvene at 10 a.m. of the following day, Thursday, April 23, 1970.)

PRIVATE WELFARE AND PENSION PLAN LEGISLATION

THURSDAY, APRIL 23, 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 recess, in room 2257, Rayburn House Office Building, Hon. John H. Dent (chairman of the subcommittee) presiding.

Present: Representatives Dent, Burton, Gaydos, and Hansen. Staff member present: S. G. Lippman, special counsel.

Mr. DENT. The General Subcommittee on Labor will come to order for the purpose of holding hearings on H.R. 1045, H.R. 1046, H.R. 16462, and related bills on private welfare and pension plans.

This morning we are very privileged to have an outstanding American, I. W. Abel, president of the United Steelworkers of America. This is the second time that Mr. Abel has presented his views and the views of his organization to this body.

We are very grateful for his appearance here this morning during a very busy schedule because we are winding up the hearings on this matter and we were promised by Mr. Abel that after more testimony was in, he would come back and add to his previous testimony before us.

So we are very happy to have you, Abe, and I am sure that the committee will have some very definite questioning. Mr. ABEL. Thank you, Mr. Chairman.

Mr. DENT. You may proceed in any way you desire.

STATEMENT OF I. W. ABEL, PRESIDENT, UNITED STEELWORKERS OF AMERICA, ACCOMPANIED BY JACK SHEEHAN, LEGISLATIVE DIRECTOR; ELLIOT BREDHOFF, SPECIAL COUNSEL; AND MURRAY LATIMER PENSION CONSULTANT

Mr. ABEL. Thank you. I am accompanied this morning, Mr. Chairman, by our actuarial advisor, Mr. Murray Latimer, and by our legislative director, Jack Sheehan, and associate general counsel, Mr. Elliot Bredhoff.

Mr. DENT. We welcome your associates to the witness table and at your discretion you may have them answer any questions that you think that are pertinent to their particular phase of the testimony.

Mr. ABEL. Thank you.

Mr. DENT. Your prepared testimony will be inserted in the record at this point and you may proceed in any manner you desire. (The documents referred to follow :)

STATEMENT OF I. W. ABEL, PRESIDENT, UNITED STEELWORKERS OF AMERICA

My name is I. W. Abel. I am President of the United Steelworkers of America. I appear here to advocate federal legislation, of the character of H.R. 1045 and H.R. 1046, which would raise the standards of conduct for the fiduciaries of employee pension plans and pension funds; require adequate funding of such plans by employers; provide liberal vested benefits for covered employees; and institute a federal system of reinsurance which would prevent covered employees from losing their retirement incomes because of financial troubles of the employer.

On December 10, 1969, Mr. Andrew J. Biemiller appeared before this Committee on behalf of the AFL-CIO in support of H.R. 1045 and H.R. 1046. I would like to associate myself with Biemiller's statement and to endorse his suggestions for modifications in these two Bills. I do not wish to take the time of the Committee to cover the same ground as Mr. Biemiller. I should like, however, to emphasize some of the points touched on in his comprehensive statement, but which are of crucial importance to Steelworkers.

No trade union in the world has as many members covered by private pension plans as does the United Steelworkers of America. We have currently about 1,000,000 of our members who participate under negotiated pension plans varying in many respects. But about 600,000 are subject to plans substantially identical to those in effect in the basic steel industry, and which have also been adopted by many other companies in other areas of our jurisdiction. Almost 175,000 of our members are now receiving pensions under plans which we have negotiated with our employers. They are the survivors of about 275,000 who have been retired on pension under these plans since the first of them began to operate in conformity with our agreements in 1950. The annual pension disbursements under the plans are of the order of $125 million, and the employer contributions are more than double that amount. Reserves have been accumulated in excess of $3 billion, and the investment income is about equal to the benefit disbursements.

These are impressive totals. But an examination of the details reveal many things which are not so impressive and which, if or when we experience a prolonged period when the economy does not expand, may forecast an inability of many plans to meet all their obligations. I would like to recite a case history the adverse results of which, on a smaller scale, have been duplicated numerous times during the last few years.

CASE HISTORY NUMBER 1

In 1950 we secured the agreement of a large and once prosperous company to the adoption of the pension plan model in most, but not all, respects on the plan which we had bargained with the basic steel companies late in 1949. This company then employed 13,000 of our members. It was the largest in the world in its field. The company, however, lagged behind as industrial technology changed, and it began to encounter a severe adverse impact upon its business. By mid 1960 the 13,000 employees had shrunk to less than 6,000. The largest of the four plants went down from 9,000 men to 2,300. Despite diversification efforts, the downtrend in employment and in the level of operations continued thereafter.

In 1964 the properties of the company were sold to a large, successful company, which organized a new subsidiary with the old company name. The new subsidiary assumed the liability of the old company with regard, among other things, to "collective bargaining agreements, including, without limitation, agreements with respect to pension programs. The union was not notified of these transactions and had no knowledge of them until after the entire arrangement had been consummated.

But the new company did not disturb any of our agreements. The pension program previously in effect was continued, along with our general collective bargaining agreement. And in 1966 we were able to negotiate substantial improvements in both pensions and wages and in other provisions of our contracts.

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