Mayer, Walter, assistant pension plan administrator, Anaconda Co., from Mario T. Noto, special counsel, Senate Subcommittee on Noto, Mario T., special counsel, Senate Subcommittee on Labor, from- Cloud, R. Taylor, director, employee benefits, Columbia Gas System Gluesenkamp, Lester O., assistant treasurer, Mallinckrodt Chem- 205 King, Mrs. S. L., assistant vice president of personnel, American 200 Munroe, Douglas, director of personnel, Anaconda Co., New York, 252 Simon, Jerome M., administrator, Local 1260, Retail Shoe Em- 186 Stiffler, Darrell V., Jr., national director of personnel and indus- Ward, Patrick A., assistant treasurer, Studebaker Worthington 158 Simon, Jerome M., administrator, Local 1260, Retail Shoe Employees Union, from Mario T. Noto, Special counsel, Senate Subcommittee on Slick, E. E., Jr., president, Haws Refractories Co., from Mario T. Noto, 341 Stiffler, Darrell V., Jr., national director of personnel and industrial Ward, Patrick A., assistant treasurer, Studebaker Worthington Corp., 157 Williams, Hon. Harrison A., a U.S. Senator from the State of New Finkelstein, Murray, member, Retail Shoe Employees' Union, Local Various individuals reflecting problem areas of private pension Anaconda Co.'s pension plan for day's pay employees, appendix A----- Appendix B. Representative letters of complaint from pension bene- ficiaries to Senator Jacob K. Javits, a U.S. Senator from the State of 183 6 Articles of agreement for the sale of Ingram-Richardson Manufactur- 314 Employee welfare or pension benefit plan annual report form as used 352 Excerpts from the Congressional Record of Apr. 5, 1971, pertinent to the 365 PRIVATE WELFARE AND PENSION PLAN STUDY, 1971 TUESDAY, JULY 27, 1971 U.S. SENATE, SUBCOMMITTEE ON LABOR OF THE COMMITTEE ON LABOR AND PUBLIC WELFARE, Washington, D.C. The subcommittee met at 10 a.m., in room 4332, New Senate Office Building, Senator Harrison A. Williams, Jr., chairman, presiding. Present: Senators Williams (presiding), Randolph, Javits, and Taft. Subcommittee staff members present: Mario T. Noto, special counsel; and Michael Gordon, minority counsel. The CHAIRMAN. The Senate Labor Subcommittee hearings on pension plans will now officially begin. These hearings beginning today by the Senate Subcommittee on Labor deal with the problems and hardships workers experience in private pension plans in our country. On March 1 of this year, the U.S. Senate by Senate Resolution 35 continued a prior mandate to this subcommittee to conduct a general study of welfare and pension plans with special emphasis on the need for protection of covered employees. Congress has a growing and deep concern for the workers who, having been led to believe that they would receive retirement benefits upon completion of their working lives, learn with sorrow that for some reason beyond their control, they are not going to receive any pension. The Subcommittee on Labor has the duty to determine whether private pension plans do, in fact, fulfill the promise to workers who must depend upon pensions in order to meet the financial obligations necessary to help them maintain a decent living upon retirement. Congress has the obligation to assure workers that pension plans do furnish them with meaningful benefits and that pensions are not just promises resulting in cruel delusions at a late stage in life. Our first hearing today is to hear testimony from workers who because of inadequate or inequitable plans failed to receive retirement pensions which, in good conscience, they believed they were entitled to. Private pension plans must be financially sound and fair, and, most importantly, be real, and not as the New York Times editorially stated on April 17, 1971, "*** a phantom for millions of workers who now never collect them." Congress needs to learn the problems of private pensions in order to respond properly to the need for corrective or remedial legislation. Constructive inquiry and effective dialog among the Congress, individual workers, employers, unions, industry. and others affected will assist us in determining the extent of need for legislative action. Our subcommittee study, in fulfillment of its mandate, will be comprehensive, methodical, and analytical. We shall ascertain the views of Government agencies which exercise regulatory control over pension plans and inquire into the extent and effectiveness of the administration and operation of plans by employers, trustees, and unions. We shall hear from these as the subcommittee attempts to cover the spectrum of problems intrinsic to pension plans, such as vesting, funding, portability, reinsurance, and fiduciary controls. At this point in the subcommittee inquiry, it is apparent that many private pension plans are properly administered and effective in accomplishing their purpose. However, many others, as a result of unsound or inequitable provisions, are inflicting hardships upon workers who have no recourse for remedy. The complaints coming to the subcommittee indicate that many welfare and pension funds are not serving their purposes because of four major problems: First, failure of pension funds to provide necessary minimum and adequate vesting provisions. Second, premature termination of pension plans without adequate insurance coverage to protect the employees. Third is the failure of pension plans to have sufficient and sound funding to meet accrued and vested liabilities. Fourth, ineffective fiduciary requirements which threaten the safety and preservation of fund assets. These shortcomings make it essential for us to inquire into the adequacy of vesting standards to be prescribed in plans, whether asset funding is sufficient or requires increase, whether plans should be reinsured, whether there is need to institute portability arrangements, and whether there is need for further and additional protective and regulatory control over fiduciaries. Subcommittee inquiry has established by overwhelming evidence that there exists inadequate and in cases even total failure of communication of pension benefits and causes for their denial to worker participants. The attempted explanations by employers, administrators, or trustees are too legalistic, too complicated for the average worker to fully comprehend. To remedy this, on July 19, 1971, I wrote to the Secretary of Labor advising him of our finding and of my support of a petition filed by Ralph Nader which seeks to bring reform in this area of communication. And I shall place a copy of that letter into the record at this point. (The following letter was subsequently supplied for the record :) As you know, the Senate Labor Subcommittee is currently conducting a comprehensive study of private pension plans in the United States, with special emphasis upon the need for protection of employees covered. This study is pursuant to Senate Resolution 35, of the current Congress. In the course of its study, the Subcommittee has learned of various hardships and inequities sustained by employee participants in pension plans and funds which result in their failure to realize the retirement benefits they had been led to believe they would receive. Among the causes for the resulting hardships, there is one which manifests itself in many cases studied by the Subcommittee. This is the total failure of or inadequacy of communication of plan provisions to worker participants resulting in a lack of knowledge or misunderstanding of the provisions of the pension plan and such benefits to which an employee would be entitled to or disqualified from. The inadequate communications to worker participants of the provisions of retirement plans in many instances is attributable to the complicated and otherwise legalistic language in the plan which is difficult, if not impossible of comprehension, by an average employee. In many instances, plan provisions are communicated in easily understandable terms to an employee too late, and as a result of plan |