601 Pennsylvania Avenue, N.W.
Suite 900, South Building
Washington, D.C. 20004-2601
March 15, 2006
The Honorable George W. Bush
President of the United States
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear President Bush:
The National Retiree Legislative Network is a non-partisan, grass roots coalition of retiree associations dedicated to securing federal legislation that protects pensions and health care benefits. Our nearly 2 million members were delighted to read news reports about your recent comments to the National Newspapers Association (NNA) where you restated your call on American businesses to live up to their pension promises to workers and retirees. Your affirmation that companies must keep their pensions properly funded to ensure that workers received promised benefits was especially timely considering that congressional negotiators have begun work on long awaited pension reform legislation. We call on you for continued support throughout the conference committee process by insisting that corporate funding rules be tightened.
In addition to these stronger funding requirements, it is critical that several other improvements be made if this legislation is to achieve true pension reform. For example, we strongly oppose any provision that retroactively legalizes cash balance conversions which have resulted in thousands of older workers suffering the ‘wearaway’ of earned benefits promised to them by their employers for years of loyal service. The legal risks associated with the conversion of defined benefit plans to cash balance plans were well-known to employers when they initiated these conversions, so Congress should not change the law retroactively to shield against lawsuits those companies that acted unfairly and unlawfully.
The NRLN also opposes a proposed change to Section 420 of the Internal Revenue Code that would lower the funded threshold for the transfer of dollars out of a pension plan from 125 percent to 115 percent, giving corporations a windfall. This is a recipe for more pension plan failures in the future.
The NRLN encourages conferees to strengthen transparency and disclosure provisions that protect pension plan participants. The effective hiding of nonproprietary disclosures involving the financial viability of a pension plan undermines the entire purpose of pension reform legislation. Specific NRLN proposals include:
· Requiring pension plan administrators to provide upon request, all relevant and updated documents that participants and retirees need to evaluate the plan’s financial status.
· Modifying Employee Retirement Income Security Act (ERISA) Section 104 to provide for the disclosure of documents related to a pension plan’s financial health, asset allocation, investment guidelines and proxy voting guidelines. This information would be made available to plan participants upon request.
· Releasing information disclosed as part of an underfunded pension plan’s ERISA Section 4010 filings to the federal Pension Benefit Guaranty Corp. (PBGC) to pension plan participants within 30 days of a written request.
We also support a provision passed by the Senate to encourage investment advice for 401(k) plan participants. At the same time, we oppose a House of Representatives measure that permits the 401(k) plan provider to advise participants on investment options that vary in terms of commission and cost. Inevitable conflicts of interest would result if this approach is advanced into law.
A final concern we have is the failure of both the Senate and House to address the removal of pension plan assets to pay non-benefit layoff allowances, severance pay and other corporate expenses. Severance costs are not pension plan benefits and, particularly at a declining company, can weaken the plan and endanger the retirement security of all other participants.
In your comments at the NNA conference you emphasized this very important principle: “If you make a promise, you keep it.” That’s all any retiree is asking – that companies honor the promises they made to their workers. If Congress fails to pass pension reform legislation in 2006, the result could drive millions of older Americans – a majority of them women – into an impoverished retirement and lead to a taxpayer-funded bailout of the federally backed insurer of pension funds – the Pension Benefit Guaranty Corp.
President, National Retiree Legislative Network
Ken Mehlman, Chairman
Republican National Committee