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designed a bill, which, like the National Labor Relations Act, the wage-hour laws and other labor standards laws, brings the workers' interests up to parity with those of employers. This legislation strikes an appropriate and equitable balance between two opposing schools of thought-those who advocate complete and stringent control of private pensions and those who oppose any form of government supervisory or regulatory control.

The Subcommittee on Labor unanimously adopted and reported out S. 4, with several major changes from S. 4 as introduced on January 4, 1973. The Subcommittee Print also contained various changes which were technical or conforming in nature. These changes are explained in more detail in the section-by-section analysis which appears later.

Examples of major changes incorporated in the Subcommittee Print included:

1. Providing plan participants on the effective date of the vesting title with retrospective vesting credit for service performed prior to the effective date of the title regardless of the age of the plan participant. (Sec. 202)

2. Requiring the Secretary of Labor to undertake studies of vesting provisions with respect to high mobility workers and to develop recommendations for revision of government procurement regulations so as to provide more adequate protection against loss of benefits to professional, scientific, and technical personnel working on government contracts. (Secs. 101, 221-223)

3. Permitting the Secretary of Labor, upon appropriate application, to provide insurance to cover unfunded vested liabilities of a plan not otherwise covered by the Act, which conforms with vesting, funding and other standards required by the Act. (Sec. 401)

4. Requiring a plan to serve notice upon the Secretary of Labor of intent to terminate the plan; failure to provide such notice results in personal liability on persons who failed to give such notice of losses incurred by the Pension Benefit Insurance Fund. (Sec. 404)

5. Provision that persons who terminate plans with intent to circumvent the Act or WPPDA shall be personally liable for losses incurred by the Pension Benefit Insurance Fund. (Sec. 404)

6. Providing that upon termination an employer shall be liable for 100% of the plan's unfunded vested liabilities, but not to exceed 50% of such employer's net worth. (Sec. 405)

7. Where upon plan termination the plan has surplus assets attributable to employee contributions, they shall be equitably distributed in relation to employee contributions. (Sec. 510)

8. Fiduciaries cannot receive any consideration from any party dealing with such fund in connection with a transaction involving the fund. (Sec. 510)

9. No person can interfere with or discriminate against a participant with respect to rights and privileges which such person is entitled to under the plan, Act, or the WPPDA. (Sec. 610)

10. It shall be unlawful for any person to use force or threaten or otherwise interfere with a person's exercise of rights under the plan, Act, or WPPDA.

11. When considering the experience of multi-employer plans for insurance premium purposes the Secretary of Labor shall take into account the withdrawal of employers from the plan. (Sec. 217)

In its Executive meeting on March 20, 1973, the Committee adopted unanimously the following three amendments:

(1) An amendment offered by Chairman Williams and Senator Javits to assure participants that optional death benefits can only be waived in writing signed by the participant after the participant receives a written explanation of the terms and conditions of the options and the effect of such waiver. The amendment would prevent a participant from losing by default an optional death benefit. (Sec. 510)

(2) An amendment offered by Senator Javits to authorize the Secretary of Labor to bring civil litigation under the Act and the Welfare and Pension Plans Disclosure Act through attorneys appointed by the Secretary (except in the Supreme Court.) (Sec. 101)

(3) An amendment offered by Senator Javits extending coverage of the fiduciary and disclosure amendments to the WPPDA to all benefit arrangements described in or permitted by Section 302 of the Taft-Hartley Act. These benefit arrangements would include jointly administered vacation funds, apprenticeship training funds, day care centers, scholarship funds, etc. (Sec. 502)

In addition, there were several technical changes adopted by the Committee.

VI. Committee Views

POLICY OF THE "RETIREMENT INCOME SECURITY FOR EMPLOYERS ACT"

The policy statement in Section 2 is most significant in that it recognizes that all of the problems in the private pension field surfaced by the Committee are so interrelated that they cannot be resolved without a comprehensive legislative program, dealing not only with malfeasance and maladministration in the plans, or the consequences of lack of adequate vesting, but also with the broad spectrum of questions such as adequacy of funding, plant shut-downs and plan terminations, transferability of vested credits, adequate communication to participants, and, in short, the establishment of certain minimum standards to which all private pension plans must conform if the private pension promise is to become a reality rather than an illusion.

DEFINITIONS

The Committee has the following technical notes concerning definitions:

The definition of "employee" is intended to encompass any person who has the status of an "employee" under a collective bargaining agreement.

The exclusion of assets of investment companies regulated under the Investment Company Act of 1940 from the definition of "fund" is not intended to exclude participating shares in an investment company held by the fund.

With respect to the term "profit-sharing retirement plan", it is intended that stock bonus, thrift and savings or similar plans with retirement features be treated as the equivalent of profit-sharing retirement plans for purposes of this Act unless expressly indicated otherwise.

With respect to the definition of "fully funded", it is intended that the assets of the plan be valued at fair market value at the time the funding status determination is made in order to ascertain whether plan assets are sufficient to cover all accrued liabilities. It is to be emphasized that "fully funded" is intended to refer to the sufficiency of assets with respect to all benefits which may be due and not just those benefits which are vested.

With respect to the term "experience deficiency", it is anticipated that the Secretary will devise rules to preclude a plan from suddenly revising actuarial standards in order to avoid or circumvent "experience deficiencies".

With respect to the term "normal service cost", it is intended that this definition be applied consistent with such cost methods recognized by the Internal Revenue Service unless there is an effort to avoid or evade the funding requirements of this Act.

With respect to the term "non-forfeitable right" or "vested right", it is not contemplated that vesting be required in benefits such as death benefits, disability benefits, or other forms of ancillary benefits provided by the plan. The plan may, of course, at its option, provide for vesting in such benefits.

With respect to the terms "normal retirement benefit" and "normal retirement age", it is intended that the participant not be compelled to await the receipt of his retirement or vested benefit beyond age 65. However, since the Act sets minimum standards, plans may provide retirement or vested benefits prior to age 65, or, on the basis of individual agreements made with participants, after age 65 if the participant so desires.

In formulating the definition of "multi-employer plan" the Committee was guided by the concept that such a plan, if sufficiently comprehensive in size or scope, would be unlikely to terminate because its existence did not depend on the economic fortunes of one employer or employer entity. The Committee recognized that certain single employer plans have characteristics similar to those of the multi-employer type described in the definition, but, on balance, it is believed that experience on plan terminations provides a reasonable basis for the distinction.

TITLE I.-ORGANIZATION

The Committee believes it is essential to concentrate in the Secretary of Labor sufficient powers to effectively implement the provisions of this Act with the minimum amount of duplication and overlapping o functions.

The Secretary's investigatory authority permits examination of plan books and records without the Secretary having reason to believe a violation of the Act (or Welfare and Pension Plans Disclosure Act) may exist. However, the Secretary is limited to one such examination annually. He may, of course, conduct an examination at any time when. he has reasonable cause to believe a violation may exist. The Committee believes that monies in a pension or welfare fund should be as safe as money in a bank or insurance company. Periodic spot-check audits by governmental examiners is a time-tested method for assuring the security of funds. At the same time, the Committee recognizes a concern over possible "harassment" which may impede the effective implementation of the Act's requirements. Limiting the Secretary to

one non-violation audit annually takes account of this concern and it is to be assumed that this authority shall be exercised in good faith and with no intent of capriciousness or harassment. In light of the large number of plans that will become subject to the Act, it is extremely doubtful, as a practical matter, that the Secretary could conduct more than one spot-check annually for any given plan.

The Secretary is also authorized to establish standards and qualifications for actuaries. This is a major innovation and indispensable to effective enforcement of the funding standards and operation of the plan termination insurance program. The Committee is unaware of any significant licensing procedures for actuaries at either the state of federal level and this may, to some extent, explain inadequate funding procedures which have been found to exist. Generally speaking, the American Academy of Actuaries is regarded as the umbrella organization with the most rigorous standards for admission to membership, and the Committee intends that the Secretary should give due weight to membership in this organization or its equivalent as a basis for certifying actuaries under the Act. Additionally, the Secretary may certify actuaries on the basis of objective standards, promulgated without regard to membership in any particular organization.

The Secretary is also required to establish and maintain reasonable limitations on actuarial assumptions. It should be noted that the Secretary is authorized not to prescribe what actuarial assumptions must be used, but rather to assure that those which are used are reasonable and reflect relevant experience.

The Secretary is authorized to undertake studies into the private pension and profit-sharing retirement plans covering a wide variety of subjects. Of particular interest to the Committee are those studies which would encompass methods of encouraging further growth of the private pension system and the advisability of additional coverage under the Act. With respect to the latter, the Committee intends that the Secretary pursue studies of those elements encompassed in this legislation to include but not be limited to vesting, funding, portability, reinsurance, and fiduciary and disclosure requirements. The Secretary is required to conduct appropriate studies of State, City and local government pension plans, exempt from S. 4, to ascertain any need for legislative actions with respect to these plans. He is further required to study the sufficiency of vesting provisions as applicable to workers who are engaged in high mobility services or professions such as scientists, engineers, teachers, architects and similar occupations. The innovative provisions of this bill require close observation to assure fulfillment of the legislative intent and accordingly, appropriate revisions or other necessary changes shall be incumbent upon the Secretary to initiate. The Secretary shall give high priority to recommendations regarding further legislation.

In order to avoid duplications and unnecessary expense, the Secretary is authorized to make arrangements with appropriate federal or state agencies for assistance in the performance of his functions. In addition, the Secretary is authorized to enter into arrangement with appropriate state agencies to assist him in implementing the Act's provisions. The states of Wisconsin and New York, for example, exercise supervision over certain pension and welfare funds in their respective jurisdictions, and the experience and technical know-how

of these state agencies would be of valuable assistance to the Secretary. It is not intended, however, that the state agencies utilized would formulate or apply substantive standards to plans subject to this Act which differ from the standards in this Act. The Secretary may also enter into appropriate agreements with such Federal Banking agencies as the Comptroller of the Currency, the Federal Deposit Insurance Corporation, etc. to assist him in administering and enforcing the fiduciary standards in the Welfare and Pension Plans Disclosure Act. PART B. COVERAGE AND EXEMPTIONS

It is intended that coverage under the Act be construed liberally to provide the maximum degree of protection to working men and women covered by private retirement programs. Conversely, exemptions should be confined to their narrow purpose.

In the case of any plan which fluctuates in terms of participant coverage both above and below twenty-six participants, it shall continue to be subject to the Act's coverage once it has become initially subject to the Act's coverage.

Plans of all non-profit institutions, with the exception of religious organizations, shall be subject to the Act in order to provide the employees of these institutions with protection equal to the protection of employees of profitmaking organizations. In the case of plans established or maintained by religious organizations for the benefit of employees engaged in activities not substantially identified with the primary role of the religious organization, such employees should obtain the benefits of coverage under this Act.

The Committee notes that special exemptions have been provided to plans which are financed exclusively through the medium of union membership dues and for plans which, as indicated above, cover less than 26 participants. As to the first, it was the Committee's conclusion, after careful consideration, that it would be unwise to impose federally mandated standards of vesting and funding on plans where the participants themselves have the means through the democratic processes of their union (as protected under the LMRDA) to install these improvements themselves. To insist on the application of the standards in this Act to such plans would, in effect, result in requiring the union members to tax themselves at a higher rate for benefit improvements which they themselves have been unwilling to accomplish for themselves by the means at hand. Such an approach would be inconsistent with the basis of this legislation which is to provide welfare and pension plan improvements where the participants do not have the means to provide these improvements themselves through their collective actions.

The Committee also concluded that an exemption for plans of small size was necessary in order to prevent discouraging small employers from establishing pension plans. The Committee has abundant statistical evidence to demonstrate that the greatest need for extending pension plan programs occurs in connection with employees of small business. While reasonable men may differ in their judgment as to whether a small plan exemption would encourage greater expansion of private pension plans among small businessmen, it is the Committee's judgment that subjecting all plans, regardless

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