The administration has not yet taken a position on these proposals. Chamber of Commerce spokesman E. S. Willis contends measures, including vesting standards, "would generate unnecessary costs, create a huge and costly new bureaucracy, reduce flexibility in pension and related fringe benefit planning, tend to limit free collective bargaining, and inhibit private pension growth.' The chamber supports the administration-backed bills.

Rep. Wright Patman (D-Tex), chairman of the House Banking and Currency Committee, who introduced bills to funnel more pension money into low-income housing, argues that the funds' growth has been achieved largely because of government concessions. The tax loss from employers' deduction of pension contributions alone is roughly $4 billion a year, according to Isadore Goodman, chief of the IRS Pension Trust Branch. Some unions in construction trades invest as much as 60 per cent of their pension assets in housing, mostly government-insured.

Others counter that pension administrators' first obligation is to beneficiaries of the pension plan.

"The fiduciary is under a responsibility to get the highest yield, and we believe that over the long-term stocks provide a better yield than fixed investments (such as mortgages)," says George M. Lingua, senior vice president in charge of the înstitutional investors division of New York's First National City Bank, the fourth largest trustee of employee retirement plans.

CONFLICT OPPORTUNITIES

Many bankers and pension administrators believe pension funds that invest heavily in the stock of the fund's own company present opportunities for conflictof-interest and place employees in double jeopardy: if the company becomes bankrupt, the pension assets are worthless.

The 1965 President's committee recommended that such investments be restricted for both pension and profit-sharing plans from the requirement on the theory that these plans are founded with an element of risk.

The profit-sharing plan of Sears, Roebuck & Co. is frequently cited as a classic example of a fund that invested successfully in the stock of the employer. More than 80 percent of the fund's assets are in Sears' stock and its rise in value has enabled $6,000-a-year employees of Sears to retire regularly with lump-sum payments in six figures. About 85 per cent of the assets of The Washington Post's profit-sharing plan are also invested in the stock of The Post.

As pension funds have grown, they have invested an increasing proportion of their assets in stocks of all types. While the value of stock listed on the New York Stock Exchange doubled in the past decade, private pension plan investment in NYSE shares increased four-fold, and state and local pension fund investment soared 10-fold.

With the shift has come increasing concentration of control of pension fund investments at relatively few banks with large trust departments. Four New York banks managed 40 per cent of the pension money in the country in 1968, a House Banking Committee study found.

The buildup of funds has caused concern among securities industry and government officials. The Securities and Exchange Commission is conducting an institutional investor study to determine, among other things, if tighter controls on pension fund investments should be legislated by Congress.

[From the Chicago Tribune, Mar. 21, 1971]

RETIREMENT DREAMS BECOME TRAGEDIES IN 'PENSION HOAXES'

(By James Strong and Ronald Koziol)

The American dream of retirement with a comfortable income and freedom from financial worries may only be a myth for millions of workers covered by private pension plans.

Of the more than 28 million workers participating in retirement programs with assets of roughly $130 billion, between a third and a half may become victims of the so-called "pension hoax" described by the many pensioners who have been left virtually penniless by unscrupulous employers, union leader and pension fund administrators.

The Tribune has learned of many such cases in an investigation of the mounting problem.

JUST THE BEGINNING

Recent federal indictments following wholesale looting of union and pension funds of the United Mine Workers and the Barbers Union only scratch the surface of fund abuses.

Senate probers are quietly conducting a detailed investigation into the legal looting of company, union and jointly administered pension programs with an eye toward seeking Congressional action this year to protect retirement security for the aged.

Results of the Senate inquiries are expected to be disclosed soon. Tribune reporters have uncovered widespread abuses that have been allowed to continue because present federal and state laws and enforcement powers are inadequate. Unchecked abuses include embezzlement, deals between unions and kickbacks, mismanagement and schemes to withhold pensions thru eligibility requirements that are excessively strict.

FIND EXAMPLES IN FILES

Tribune reporters unraveled examples of pension fund abuses from records on file with the Department of Labor. The pension fund records are submitted to the department under provisions of the Welfare and Pension Act of 1958, an act which does little more than require disclosure. It provides only limited authority to investigate possible abuses.

Among the examples found were:

A Texas trailer manufacturer borrowed heavily from his employes' fund just before the company went bankrupt.

A company-appointed trustee of a Chicago manufacturing company put $250,000 69 percent-of the assets of the employe pension fund into the company's preferred stock. In a year, the stock was worthless and the fund's assets had shrunk to $13,500.

EQUIPMENT RENTAL SCHEME

A Midwest hotel chain, whose executives administer the pension plan, saves the costs of buying air conditioners and television sets by first purchasing the equipment thru the fund and then renting the equipment from the fund at very low rates.

Such loose control of pension funds has led to murder. Two members of a painters' union local in San Francisco, Dow Wilson and Lloyd Green, were killed by trustees to cover thefts from union pension funds.

The trustees, later convicted and sentenced to prison, also made questionable loans from the fund.

A plumbers' union local in Asbury Park, N.J., anxious to gain control of $720,000 in pension fund assets, paid the insurance company administering the plan $66,000 in penalties to regain control of the assets.

MOST SCHEMES ARE LEGAL

Most sophisticated plans to loot pension funds or swindle pensioners' retirement funds are legal. As a consequence, agencies of the Department of Labor and Justice and the Internal Revenue Service are helpless to aid victims, said Frank Castaneda, a special investigator for Labor's welfare and pension fund branch. "Sure, we see the continued abuses of pension funds but we can't do a thing about them," Castaneda said in an interview. "We have no powers to investigate and even if we did, there are no laws to stop abuses."

Castaneda noted that the great majority of pension plans are above criticism but he said far too many abuses involving unsuspecting workers have come to light in recent years.

There now are 158,000 private pension plans in effect in the United States. The funds' $130 billion in assets are virtually unregulated.

225,000 LOST PENSIONS

During a study conducted from 1955 to 1965, 4,300 pension plans affecting 225,000 persons were terminated. Presently, 500 plans, affecting about 25,000 workers, are cut off each year.

Of the 4,300 terminations, 44 percent occurred during financial difficulties when pension funds were likely to suffer losses, said Thomas Donahue, a former assistant secretary of labor.

There are no records available to determine how many, if any, victims of pension plan terminations received a share of the funds.

"Too often victims never knew anything about their pension plan, who administered it, eligibility, how much they would be entitled to, or if there was any money in the fund," Castaneda said.

JAVITS HITS SLOW ACTION

Sen. Jacob Javits [R., N.Y.] said in a statement that he believes there has been "a marshaling of forces aimed at frustrating pension fund reform legislation."

"These forces, which include substantial segments of the business community and even some international unions, are quite formidable and it will require great unity and perseverance on the part of many, including the trade union movement, if effective reforms are to be realized," he said.

The workers hardest hit at retirement age by pension fund abuses are those involved in industries with high employe turnover. These workers often are women, low income earners and members of minority groups employed in unstable industries.

These workers frequently change jobs, forfeiting rights to pension contributions they made to company or union funds in lieu of wages.

HITS WHITE COLLAR WORKERS

As a result of the present financial climate, large numbers of white collar workers have discovered the problems of pension loss or denial for the first time.

"This is no longer a blue collar problem alone, but one that crosses all color lines, classes and income levels," Michael S. Gordon, special minority counsel to the Senate Labor Committee, said in an interview.

He said skilled technicians and executives nearing 40 affected by cutbacks in military and aerospace industries are concerned as much about employment with adequate pension benefits as they are about finding jobs.

Sen. Harrison A. Williams Jr. [D., N.J.], a leading proponent of pension reform legislation, gave a summary of what he said was the average worker's chances of getting a retirement pension from a private plan:

"IF you manage to get a job with a company that has a private pension plan, IF you stay with that same company [in some cases, same industry] for 25 years without being laid off or discharged, IF you survive to age 65, IF the company does not go out of business and IF the pension fund does not suffer losses in its investments-you may be lucky enough to get an adequate pension."

Senator JAVITS. Mr. Chairman, many people equate what may be inefficiency with dishonesty. There is no such equation at all. We can be very critical of a pension plan trustee who is earning, in a highinterest market, maybe 2 or 3 or 4 percent, which is highly inefficient and extremely imprudent, but it certainly is not necessarily dishonest. On the contrary, it may be earned that way because of excessive attempts to be ultraconservative and ultracorrect in terms of what investment one is making.

FORFEITURES THE NEED FOR A VESTING STANDARD

The key to what I think we need to do is vesting, because this is where the big complaints come in. People work for years and years and then they find that they retire with "dust in their mouths."

We have a whole batch of letters which have come from an anguished public as a result of learning about this proposed legislation, and I would like, Mr. Chairman, to have the leave of the Chair to introduce as part of my testimony three of these letters in which we have excised the names of the writer in the interest of fairness, but we have the originals, and then, Mr. Chairman, I would like to submit to the Chair probably 40 others and ask unanimous consent that the three to which I refer be made part of my remarks and that the remainder, identified as appendix B, be inserted following my testimony.

Mr. DENT. Without objection, the request is granted. (The letters referred to follow:)

Senator JACOB K. JAVITS.

APRIL 2, 1971.

DEAR SENATOR: May I have several copies of your bill that has been introduced in the Senate relative to guarantee pension rights for vested assessments after five years.

Believing the bill has merit now denied those retired, of benefits actually due them; and that your bill should include a "portability" clause covering all 50 states, if same is not already inserted.

May I state my case briefly:

Belonging to a parent national union, that claims they have no jurisdiction as regards local union pension funds.

One local union of which I was a member for 34 years and assessed for that length of time for pension benefits if I retired after 20 years, but a clause inserted stated I must return to that local to receive that benefit. After 34 years I moved from that state and secured employment in New York.

After working another 15 years in the latter state I retired, but this local also had a 20-year clause, although I was assessed 15 years for pension benefits.

So you see I paid into local pension funds for 52 years and at the present time I am not entitled to any benefits from either of the two locals, except the former if I rejoin that group, out of state.

Surely both locals should be covered by insurance laws guaranteeing benefits, regardless of what state they lived in upon retirement, and should be retroactive to the date of that retirement.

Thanking you for introducing such a wonderful bill, and hoping it becomes federal law in all 50 states, so future retirees are not forfeiting pensions actually due them.

P.S.

Sincerely,

From the above you can judge why I wrote you previously for action on a World War I pension. Seems I get nothing no place!

APRIL 5, 1971.

Senator JACOB K. JAVITS.

DEAR SENATOR: I have read with a great deal of interest the U.P.I. release on pension funds of large companies.

My circumstances should be brought to light: Employed by -Company at age 17, September 1, 1942 until April 19, 1969-26 years. Required surgery and was unable to return to my job as manager. At age 35 after 18 years of work I did not qualify for the pension program because vested rights are acquired only at age 50. At age 46 I do not qualify for any pension rights. After 261⁄2 years of loyal and continuous employment in capacity as manager and District Manager, I have been advised that I am no longer on the pension program.

I have no income as social security advised my disability is not serious enough continue any benefits.

I applaud your efforts to expose this fraud upon millions of innocent employees all over America.

Sincerely,

APRIL 12, 1971.

DEAR SENATOR JAVITS: Your article in the New York Times of April 1, 1971, regarding the introduction of a sweeping pension reform plan, struck me very forcibly because of my own experience.

After being associated with -Company for 33 years my employment was terminated, and I received no pension whatsoever. The money was put into a private pension plan by the firm. This not alone applies to me, but to many others in the above mentioned company, and if you wish their names, I will be glad to furnish them to you.

I personally feel that these pension plans should be compelled to compensate, in some way, for the monies put in for all those years.

If there is anything further about which I can enlighten you regarding this shocking situation, I will be only too happy to do so.

I shall greatly appreciate hearing from you.

Sincerely yours,

Senator JAVITS. Here is a letter dated April 12, 1971, from a man who says:

After being associated with the company for thirty-three years, my employment was terminated. and I received no pension whatsoever. The money was put into a private pension plan by the firm. This not alone applies to me, but to many others in the above-mentioned company, and if you wish their names, I will be glad to furnish them to you.

Another, dated April 5, 1971. He says as follows:

My circumstances should be brought to light. I became employed by company at age 17, September 1, 1942, until April 19, 1969, 26 years. I required surgery and was unable to return to my job as manager. At age 35, after 18 years of work, I did not qualify for the pension plan because vested rights are acquired only at age 50, at age 46 I do not qualify for any pension rights. After 26 and onehalf years of loyal and continuous employment in capacity as manager and district manager, I have been advised that I am no longer on the pension program. Here is a particularly horrendous situation. Dated April 2, 1971. Here is a man who paid into a pension plan for 52 years and has nothing.. Here is how he describes it. It is so tragic it is almost ludicrous:

Belonging to a parent national union that claims they have no jurisdiction as regards local union pension funds.

One local union of which I was a member for 34 years and assessed for that length of time for the pension benefits if I retired after 20 years, but a clause inserted stated I must return to that local to receive that benefit. After 34 years I moved from that state and secured employment in New York.

After working another 15 years in the latter state, I retired, but this local also had a 20-year clause. Although I was assessed fifteen years for pension benefits. So you see, I paid into local pension funds for 52 years-and at the present time I am not entitled to any benefit from either of the two locals except the former if I were to join that group out of state.

That is just a sample. There are hundreds of those.

Now, vesting, Mr. Chairman. Of course, it is by now a cliche that we are dealing with enormous financial interests here. Thirty million workers, an estimated 30 million, covered by private pension plans, with assets of $130 billion, predicted to grow to over $200 billion by 1980.

It is the largest aggregate amount of virtually unregulated money in the Nation. Just think of the tremendous power of that amount of money if properly utilized for the benefit of those whose labor caused it to be built up.

The whole essence of the problem is to draw-and I am not going to spell out the details of my testimony, the Chair is familiar with it-but the whole essence of the problem is to find a way in which labor mobility because that is the tradition in our country-can be reconciled with some elementary right to enjoy some of the fruits of pension payment.

THE SENATE LABOR SUBCOMMITTEE STUDY

Now, the survey, which the Senate financed to the extent of half a million dollars, conducted by the Labor Subcommittee in the Senate headed by Senator Williams and myself as ranking member, and of