As early as 1968, the Monthly Labor Review of the U.S. Department of Labor reported that "At least half of the members of multiemployer plans are either in plans which are national in scope or in regional plans which permit reciprocity." Since then, reciprocal agreements have expanded.

It is our concern, therefore, that mandating a single vesting standard for both single and multemployer plans will inhibit the highly desirable movement toward reciprocity between multiemployer plans.

The 1967 convention resolution on employee benefit plans was adopted by the AFL-CIO after an indepth study of the problem was conducted by a special committee of the AFL-CIO executive council. This subcommittee was under the chairmanship of I. W. Abel, president of the United Steelworkers of America. The subcommittee was assisted by two technical committees. Many meetings were held. It was the conclusion of the special subcommittee that single and multiemployer plans were quite different and that standards that might be appropriate for one would not be appropriate for the other. The 1967 convention resolution stated:

The pension credits of workers covered by a multi-employer plan are portable as between different participating employers. Whether financed by employer contributions, joint contributions or solely out of union dues, such plans provide continuing coverage for workers remaining in the plan's jurisdiction regardless of where they work. Moreover, the bankruptcy of one employer in a multiemployer plan does not affect the solvency of the pension trust. Thus, a multiemployer plan continues to protect the rights to benefits of workers who may lose their jobs because of the shutdown or failure of their participating employer but who continue to be covered by the plan through employment with another participating employer. Because of these built-in safeguards in multi-employer plans, standards of vesting and funding required for single-employer plans are not appropriate for multi-employer plans.

Resolved: The AFL-CIO favors the inclusion in private pension plans of adequate and appropriate vesting and funding provisions. To provide adequate safeguards to workers covered by single-employer plans we favor Federal legislation establishing minimum requirements of vesting and funding. Because multiemployer plans, whether financed by employer contributions, joint contributions or solely out of union dues, contain built-in safeguards for the pension rights of workers covered by them, any such legislation should exempt multi-employer plans.

The vesting standards outlined in the bill appears to us to be an attempt to bridge the fundamental difference between single and multiemployer plans. As such, however, the standard is not strict enough for single-employer plans and too strict for multiemployer plans. We urge a 10-year vesting standard for single-employer plans and exemption of multiemployer plans.

We recognize that two single employers might form a multiemployer plan for the purpose of evading the vesting and funding standards of the bill. We suggest that the definition of a multiemployer plan be more carefully drawn than it is in section 3(32). The definition of a multiemployer plan in S. 2, introduced by Senator Javits, would, in our opinion, be more appropriate than the definition in S. 3598.

Title IV establishes a plan termination insurance program to insure beneficiaries of private pension plans against loss of their vested benefits when their plan is terminated. The program guarantees such rights for an annual premium not to exceed 2 percent of a plan's unfunded liability for vested benefits, with certain limitations.

The AFL-CIO strongly endorses this insurance program. As stated in the 1967 resolution

The AFL-CIO re-affirms its policy position in favor of pension reinsurance adopted in the 1963 and 1965 Conventions and calls upon Congress to pass legislation providing at reasonable cost protection to workers against the loss of pension rights.

However, we are disappointed that S. 3598 would only protect the earned retirement credits of workers after enactment of the bill. As we read the bill, this would leave uninsured all accrued pension credits of all workers in all plans in existence today. Many older workers would have no protection of benefit rights accrued prior to enactment of the bill. Only younger workers entering the labor force after the bill is enacted would have the assurance of receiving their full pension. We therefore urge that title IV be amended to insure all pension credits earned before as well as after the date of enactment.

Although not included in title IV, section 217 (e) (1), (2), and (3) would also appear to have special significance in relation to the bill's proposed reinsurance program. This provision is new and not included in any other bill.

The purpose of the section would be to make a multi-employer plan whole were one or more employers to withdraw from the plan with the result of causing a significant reduction in the rate of aggregate contributions to the plan. We strongly support this provision.

We very much favor section 405 making employers liable for reimbursement to the insurance fund for insurance benefits paid out where such employers are not bankrupt. We also urge, however, that employers should be required to accord amounts due welfare and pension plans the same priority as wages under the Bankruptcy Act. As stated in the 1961 convention resolution on "Payments Due Welfare and Pension Plans a Priority Under the Bankruptcy Act.:

The AFL-CIO from its very inception has not only voluntarily sought to establish standards for the administration of these funds, but supported and continues to support legislation which is designed to conserve the assets of welfare and pension plans for the men and women for whose benefit they are intended. It is for this reason that we now favor the adoption of legislation which would serve to accord these payments to welfare and pension plans the same priority under the Bankruptcy Act that is now accorded direct wage payments made to workers. These payments to the welfare and pension plans from the assets of bankrupt employers not only serve to further the financial soundness of these programs, but more important, can serve to provide workers, and often times their dependents with the protection so vital to their peace of mind during a period when there is a loss of income, resulting from loss of jobs.

Such a provision would, in our opinion, make the insurance program more viable as it would prevent employers from establishing pension plans in anticipation of bankruptcy for the purpose of collecting

insurance.

Title V of the bill amends the Welfare and Pension Plans Disclosure Act to accomplish the following:

1. Setting forth responsibilities applicable to persons occupying a fiduciary relationship to employee benefit plans, including a "prudent

man" standard.

2. Adding to the reporting requirements in order to disclose more significant information about plans and the financial transactions engaged in by those controlling plan investments and operations.

3. Barring from responsible fiduciary positions all persons convicted of certain criminal offenses.

Existing law is clearly inadequate to provide protection of the interests of such employees. Section 302 of the Taft-Hartley Act purports to provide certain safeguards in the interest of beneficiaries of jointly administered health, welfare, and pension plans. Whether or not these safeguards are adequate, and lawyers do not agree as to this, it is clear that these safeguards do not apply to plans under unilateral administration.

It is also clear that while the common law of trusts as it is recognized in most States-requiring a trustee to carry out the purposes of the trust, act in good faith and exercise as much care and diligence as a prudent man would exercise in dealing with his own money-offers further protection, in practice this is not all certain. For example: (1) the plan may not be established as a trust; (2) the trust may be established only as a funding medium. In such cases the courts have leaned toward the view that an employee-beneficiary has contractual rights enforceable against the employer, but not as a beneficiary of the trust; (3) conventional trust law is generally not applicable to employer administrators who are not technically "trustees". Another nonlegalistic difficulty is that few of those covered by these plans have the legal or financial knowledge required to discover breaches of trust.

For these reasons, the AFL-CIO favors a Federal fiduciary statute, enforceable through the Federal courts, which would give participants, beneficiaries, or their representatives and the Secretary of Labor the right to sue for appropriate remedies if the statute is violated.

Hence, we very much favor title V with the exception that we believe the list of crimes enumerated in section 15 (h) is far too broad and would, in effect, bar many honest and conscientious labor officials from acting as a trustee of a health, welfare or pension plan. Our attorneys advise us that a person could be barred from holding a responsible position with a trust for having been convicted of participating in a civil rights demonstration in front of a courthouse or of disobeying a court injunction to cease picketing in a labor-management dispute.

Obviously, there are very sensitive points to organized labor, and we urge that section 15 (h) be redrafted to apply primarily to violations of law relevant to the issues of fiduciary responsibility.

As indicated, we very much favor title VI because it lodges the primary responsibility for enforcement of the law with the Federal

courts.

In conclusion, Mr. Chairman, we hope the subcommittee will carefully consider our suggested changes toward the goal of enacting a practical and workable bill that will protect the interests of the beneficiaries and our members in the private pension system while at the same time not unduly inhibiting the future growth of pension plans. The CHAIRMAN. Thank you very much, Mr. Biemiller. We are more than grateful for this statement. I would certainly commend the AFLCIO for its pioneering work in this whole area to bring an additional measure of economic security to private pension plans. You in your convention resolutions running back to 1963, 1965, 1967, espoused many of these ideas which I believe are incorporated in this bill.

Your statement suggests some changes that I will advocate in the Williams-Javits bill. Your last point particularly, listing as crimes the kind of activities you described, such as demonstrations, is particularly pertinent.

I would like to turn to Senator Javits before we continue further discussion.

Senator JAVITS. Mr. Chairman, I thank you. I wish to explain that I am managing on the floor with someone else the so-called poverty bill, and as a ranking member of the committee have to be upstairs to mark up a bill for the Consumer Protection Agency, all at the same time, so I hope that Mr. Abel and his members will understand if I simply am not to be here physically.

To deal with your problems, Mr. Biemiller, first, for your support I thank you very much. It symbolizes the fact that labor has now recog nized that pension plans can be a major guarantee against the difficulty in later years. We want the AFL-CIO to join us in this, and I am very glad to see this, as I am sure, are Mr. Abel and the steelworkers.

I am troubled about your feeling that multiemployer plans should be exempted for two reasons. One is a legal question as to whether we have any right to discriminate, if we are going to provide for some vesting at the end of 8 years and full vesting at 15 years, or if we went to a higher standard. Are we not in a position where we would be discriminating against the worker in the multiemployer plan if we left him out.

I say that, Mr. Biemiller, and then I hope you will comment, because we have received thousands of letters indicating that this has simply touched the nerve of American workers in a way which is unparalleled.

Interestingly enough many of these letters relate to multiemployer plans. If you will allow me, I would like to read one for the record. I can put a whole stack of them in the record—and you are welcome to examine the thousands of them.

Here is a worker who writes me and says the following-I am not going to read the preliminary material. He says:

The bill has merit. May I state my views 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 states I must return to that local to receive that benefit.

After 34 years I moved from that state, 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, also 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.

Maybe there are some mitigating circumstances in the man's contract, the union situation, et cetera, but the important point is, as far as we are concerned, that if we are going to legislate, do we have any right to legislate discriminatorily in respect of individual plans as against multiemployer plans?

You yourself say a single employer can sometimes wreck a multiemployer plan. That is why you want the insurance to extend to it and therefore should that not be just as true for the worker in the multiemployer plan?

That is my question.

Mr. BIEMILLER. Mr. Shoemaker.

Mr. SHOEMAKER. Senator Javits, I think as we pointed out in our testimony there is a growing trend toward reciprocity among multiemployer plans.

In the instance you refer to in the letter I think that we are day by day taking care of this situation. As a matter of fact, I have in my possession an unpublished study which indicates that 65 percent of the employees in multiemployer plans are in plans that provide some reciprocity.

I think that in a relatively short time you will see the kinds of problem you outlined become much less acute.

Senator JAVITS. You used a phrase, Mr. Shoemaker, which reminds me of why we are passing this legislation. You said, "day by day." This morning while I was shaving I heard this song from Godspell, "Day by Day."

We are trying to reform this whole system because we do not want "pie in the sky," we want it now. [Applause.]

I appreciate that, but this is hardly the way to conduct a hearing. Seriously, we want no demonstrations.

Mr. BIEMILLER. May I add just one word, Senator, to what Mr. Shoemaker has said.

Senator JAVITS. Certainly.

Mr. BIEMILLER. As I think you are aware, the most vociferous supporters of the theory that multiemployer plans should be exempt come from the garment trades, the maritime trades, the building trades, all of whom have various kinds of multiemployer plans, and who insist that they have built-in vesting and funding that will protect their people.

I assume that your technical people will be in touch with our technical people, and I would suggest this is the area in which this matter should be thrashed out.

Senator JAVITS. I think you are right, Mr. Biemiller, and we will do our utmost to do it. But I hope that also the AFL-CIO will encourage them to come part of the way to meet us. Personally I feel strongly that we should not exempt multiemployer plans, but we should shape the legislation to accommodate them.

These are great unions with great plans, far ahead of everybody else, so I am all for it, but I believe that a basic protection, a bill of rights for the American worker in respect to pension plans, will have to include adequate protection for everyone. But we will be more than accommodating in trying to do two things:

1. Give them an opportunity to conform; give them plenty of time— I would not try to push them in such a way as to jeopardize the great things they have done.

2. Try to conform to their needs. You have pointed out one thing, entitlement to a lower premium rate because they are a better risk in terms of insurance. I thoroughly agree with that. So we will try. Also, Mr. Biemiller, if we have any technical questions we would like to get the federation's view on, may we submit written questions to you?

Mr. BIEMILLER. We would be very happy to answer such questions. Senator JAVITS. One final thing and then I shall be through. On the matter of insuring pension credits prior to the date of enactment of legislation, that interests me greatly, and I would like to see