Mr. HEFTEL. Do you really think that the major national companies are better able to judge what is in the best interest of the citizens of the State or the people who represent the people in the State? Mr. NASH. I think the major national corporations are in a better position to judge what is in the interest of their employees than is a legislature which is not working on a day-to-day basis in dealing with those employees. Yes; I believe that. Mr. ERLENBORN. I would like to enter into this discussion. I think it is rather an interesting one. First of all, let me say, having been through the entire legislative history of ERISA from the days the first proposals were made until the President signed a bill into law on Labor Day, 1974, one of the most dramatic changes in that legislative and political history of ERISA was the growing tendency of States to intervene in this area with laws to regulate pension and welfare plans. That changed the political environment where many people who were opposed to the passage of Federal legislation were now seeking Federal legislation with preemption. That was key to the political support that was necessary to get ERISA enacted into law. It was the fear of having 50 different regulators in the 50 different States that led many employers to the conclusion that a Federal law was now desirable, a Federal law with comprehensive preemption. As far as the desirability of any particular part of the employment, wage, and benefit package being mandated by State law, why should we take away from employees-and I know everybody always says we are doing a favor to the employer-but why should we take away from employees the right to engage in collective bargaining? Why should employees no longer have the right to join together and bargain with their employer for the various parts of their wage and benefits package? We do it supposedly in the best interest of the employee just as we do minimum wage laws. For instance, the Raspberry column yesterday pointed out that the minimum wage laws that we always suppose are going to help those at the low end of the economic scale actually may be putting some employers at the low end of the economic scale out of business because they can't afford to pay those wages and it may put employees out of work because they cannot command those kind of wages. So my feeling is that if we were to allow each State to mandate each part of the wage and benefit package-they can already mandate minimum wage-now if we let them mandate minimum health insurance and pretty soon they will mandate insurance, little by little employees are robbed by the State legislatures of their ability to join together and engage in collective bargaining by the employer to determine what their wage and benefit package is going to be. I just don't think that is in the best interest of the employees. Mr. HEFTEL. Again, if I may observe-we do have a vote so we will have to adjourn and come back. But rather quickly I would like to observe that not all employees bargain collectively because obviously all employees are not unionized. I don't think that Mr. Erlenborn would like to propose that all employees must unionize. But I do believe that we have a classic example of that which is supposed to be good for Ford Motor Co. is good for the nation, that which is good for national companies is good for the people. I think that subject is up to discussion. We will have an opportunity, hopefully, to hear testimony from the representatives of the State of Hawaii about whether or not we are putting the employees out of work because we are putting the employers out of business because of the requirements for health insurance programs. We will be back as fast as we can. Thank you very much. [A brief recess was taken.] Mr. Miller [presiding]. The committee will come back to order, please. I believe when we recessed to vote, Mr. Erlenborn, you were engaged in a line of questioning. Please go ahead and proceed. Mr. ERLENBORN. Thank you, Mr. Chairman, for calling my remarks a line of questioning. I think I was making a statement rather than asking questions of the witnesses, all of whom I know very well and I know they agree with my philosophy. Mr. MILLER. Well, we will excuse this panel. Mr. ERLENBORN. Let me make the observation that if the theory of the gentleman from Hawaii is correct and it is socially desirable for States to move in this area, then we may also say it would be socially desirable for them to have vacation plans or other employee benefit plans and dental care, mental health care or whatever it might be, until the whole idea of preemption and the protection that it gives both employee and employer from the vagaries of what individual State legislatures might decide from time to time would be gone. Let me also say that giving the State legislatures the ability to set minimum standards, which means benefit levels, is a very dangerous thing in light of the history of what we have done with social security here at the Federal level. There is always that tendency to liberalize benefits on a biennial basis, always in even numbered years, taking effect sometime in late summer before the November election. That tendency I think would be enhanced in this particular field because there would be no requirement on the part of the legislatures to raise the funds to pay for those benefits. We have had some discipline in social security, though precious little, because we have had to raise the money to pay for the benefits. Thank you, Mr. Chairman. Mr. MILLER. We will probably find a little greater discipline the next time around. Let me ask a question on the Daniel case. Your argument against that ruling would be for the retroactive liability. That is your real concern there, that you may have a lot of Mr. Daniels around. As you mentioned, the people on behalf of which he sued were not limited by that court. There could be obviously other international pension funds or local unions. So are you arguing also against disclosure of these primary benefits or against the retroactive liability that was brought into play by the Daniel case? Mr. NASH. We are arguing both. One of our major concerns is the retroactive liability which could threaten the existence of pension plans. However, we are not arguing against disclosure as required by ERISA. The Congress took years to determine what was appropriate disclosure under ERISA and the Congress specifically set forth the various things that ought to be disclosed. The problem with the disclosure provisions of the antifraud provisions of the Security Acts is that what has to be disclosed must be determined on a case-by-case basis so no one knows in advance what to disclose. Nor indeed under the seventh circuit decision do you know when you have to disclose. Thus, not only do you overburden plans with disclosure on almost a daily basis, because the circuit seems to require disclosure every day the employee decides to continue working for his employer, but you also don't know what to disclose. That continues to raise prospect liability and the possibility of litigation in the future because you never know if you have disclosed everything you were supposed to do and at the correct point in time. Mr. MILLER. So you are saying under the decision you are calling into play the idea that this is a securities transaction and that a greater level of disclosure is required than the majority of parties agreed to under ERISA as to the material facts as defined in ERISA requiring disclosure? Mr. NASH. ERISA defines what are the facts you must disclose and when you must disclose them. The antifraud provisions don't give you that kind of definition. Thus, to apply the latter creates potential liability and vexatious litigation far beyond what anybody thought would be the result under ERISA and far beyond that necessary to protect employee participation in a retirement or benefit plan. Our concern is not, and we are not arguing here today that Mr. Daniel should not have gotten his pension. He indeed has four or five other causes of action in his lawsuit, any one of which may result in his ultimately getting his pension. We are saying that the legal theory the seventh circuit used, and which is now before the Supreme Court, has such possible disruptive affects that we think it is ill advised and something the Congress ought to look at and correct. STATEMENT OF JERRY L. OPPENHEIMER Mr. OPPENHEIMER. Mr. Chairman, if I might return very briefly to the prior discussion, I would like to make two brief points. One, there is more involved than the convenience of employers. Simply put, it is a matter of cost or contributions and what types of benefits those costs or contributions are to provide. Second, there is more involved than the convenience of large employers. Perhaps the best example is Dawson v. Whalen itself which involved a multiemployer plan. In Mr. Stone's opening comments he gave you as an example what happened there when they had to reslice the pie. They gave up vision and dental coverage in favor of mental health coverage which in that case was not what the unions and the employees and the employers wanted. Mr. Chairman, 2 weeks ago, on May 17, as a part of these hearings, you received testimony from the Treasury's Tax Legisla tive Counsel, Daniel I. Halperin, in support of the President's proposals, as part of his tax program, to provide significant new rules regarding the integration of benefits provided by private pension plans and social security. In testimony last March before the Committee on Ways and Means, on behalf of ERIC, I strongly opposed the President's integration proposal on the ground that it could well be inconsistent with the recommendations of the Presidential Retirement Policy Commission and of the National Commission on Social Security which were charged with developing a comprehensive national retirement income policy; that it would be costly; that it would cause serious disruption for employers and plans; that it would engender staggering additional regulations, rulings, plan amendments, summary plan description, and reports and attendant expense; that it could therefore result in additional plan terminations; that it is technically deficient; that it would be most detrimental to employees earning $20,000 to $50,000 annually, who are, of course, the same employees who will bear the greatest portion of the recently enacted social security tax increase; and that it would not raise significant revenue and, thus, it is not essential to the President's tax program. The subcommittee statf has a copy of my March 13, 1978, prepared statement which deals with this and other of the President's "tax reform" proposals which would affect employee benefits. I request that it be included in the record of these hearings. I would particularly direct your attention to the discussion of the integration proposal on pages 10 through 35. [A copy of the March 13, 1978, testimony of Mr. Oppenheimer may be found in the appendix, on page 1133.] Mr. OPPENHEIMER.On March 21 I also testified on behalf of ERIC before the Subcommittee on Oversight of the Committee on Ways and Means regarding the simplification and administrative aspects of the President's proposals. As I then indicated, it is ERIC's position that the proposals to establish new rules to govern integration of private pension plans and social security would add significant complexity to the law and would present serious administrative and compliance problems. Your staff also has a copy of my March 17 letter to Chairman Gibbons which summarizes the points I developed at that hearing. We request that a copy of that letter also be included in the record of these hearings. [A copy of the letter may be found in the appendix, p. 1133.] Mr. OPPENHEIMER. We note that in his May 17, 1978, testimony, Mr. Halperin recognized that here has been significant opposition to the President's proposals and indicated that the Treasury is considering modifying them. I received on May 12, 1978 my copy of the letter attached as appendix B to Mr. Halperin's testimony. Our initial reaction is that the modifications described therein do not respond adequately to ERIC's objections, but we have the modifications under consideration. Thank you for the opportunity to present our views. We would be happy to respond to any questions. [The prepared statement of the ERISA Industry Committee follows:] STATEMENT OF THE ERISA INDUSTRY COMMITTEE (ERIC) BEFORE THE LABOR STANDARDS SUBCOMITEE THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 ("ERISA") JUNE 1, 1973 Mr. Chairman and Members of the Subcommittee: My name is George J. Pantos, and I am a partner in the law firm of Vedder, Price, Kaufman, Kammholz and Day in Washington, D.C. With me today are Peter G. Nash, a partner in the same law firm, Jerry L. Oppenheimer, a partner with the law firm of Mayer, Brown & Platt, and Robert S. Stone, Senior Counsel, International Eusiness Machines Corporation (IBM), Armonk, New York, We appear today on behalf of the ERISA Industry Committee (ERIC), a nonprofit corporation whose members constitute an association of more than 80 major corporations engaged in a wide cross-section of American business, each of which maintains one of more retirement plans for the benefit of their employees. In all, the companies represented in ERIC maintain a total of over 750 separate employee retirement plans which pay benefits to some 1.5 million retirees and other beneficiaries and the approximately 8.5 million participants (employees, retirees, and other beneficiaries) of pension plans sponsored by ERIC members represent about 20 percent of all participants in private pension plans. Through ERIC, these companies coordinate their views and provide information and comments to the Department of Labor, Internal Revenue Service and Pension Benefit Guaranty Corporation concerning the impact on plan sponsors |