Page images

In the overall picture, I want to say that you are moving in the ep direction that I think the committee contemplated when we started; rew that is a slow, but deliberate, administrative procedure to see that de we do not get conflicting regulations under ERISA that would create a massive confusion and mistrust. If we have to move slowly, and there are to be sure many arguments made to us that you are not moving to fast enough, we will just have to work with you, and you work with e us, to get the kind of regulations that will work, because in this ne day and age, more than any other in my lifetime, pensioners are fic very, very much aware of the dangers involved in not having sound tre pension plans and sound pension administration. We are counting on your Department to give us that.

As for any statutory changes that you desire, both Mr. Erlenborn and I have frequently signified our willingness to work with the agency to push for legislation that would make ERISA more workable and be more efficient.

Mr. HUTCHINSON. Mr. Chairman, I think that this committee's initial oversight hearings indicated that the Department wished to give the statute an opportunity to work for a period of time so we could learn where the problems and kinks were. I think we learned a fair ai amount in 1975.

In 1976, most of the substantive changes in plans will have to occur, and, the first financial reporting will occur. As we see that, we will be in a much better posture to determine where corrections may be necessary.

Mr. DENT. If you want to be everlasting heroes to the body politic keep developing shorter forms and less cumbersome paperwork. There is a feeling in the country that if we do not cut off some of the forms and paperwork, there will not be any trees left.

I want to know something about how you are coming along. I listen carefully to your dealing with the so-called Teamster's case which could get out of hand unless it is handled by both IRS and you and the Justice Department in a way that does not reflect the open and positive nature of pension plans on the whole.

As I noted through your report here, apparently you are supporting the position the Teamsters have taken in the Daniels case, is that right?

Mr. HUTCHINSON. What we have decided to do, Mr. Chairman, is to offer the court, if an appeal is granted, the Secretary of Labor's observations on how the application of the Federal securities laws might conflict with, or at least cause problems with, the application of the Federal labor law and labor policy.

I think that is something that we have an obligation to apprise the court of, be it the Labor-Management Relations Act or ERISA. There are relationships between parties in a bargaining situation, between management and the recognized, certified collective bargaining agent of employees that could be disrupted by the type of decisions handed down.

We are going to present our position to the court.

Mr. DENT. That is where you and the Teamsters are working toward the same goal?

Mr. HUTCHINSON. Their appeal is much broader. We simply want to advise the court of our interpretation of Federal labor laws and

how the district court's decision might affect those laws and the cies they reflect.

As far as I am concerned, I do not think at this time that I go on with the questioning. We have a long morning. We have of our members here now.

Mr. Gaydos?

Mr. GAYDOS. I have no questions. I thank the gentleman fo appearance. It is helpful to the committee.

Mr. DENT. Mr. Erlenborn?

Mr. ERLENBORN. No questions.
Mr. DENT. Mr. Goodling?

Mr. GOODLING. I have one question.

A gentlemen asked me if management must inform the particip what their responsibilities are in relationship to ERISA. What of information should the participants receive? He said that the pa pants in his plan have received none. The management does even want them to ask questions about it.

Then I noticed on the first page of your testimony, that you management must provide an ERISA notice to participants beneficiaries on or before May 30, 1976. If management is not o plying with that, what do the employees do about that?

Mr. HUTCHINSON. The employees have a right under the sta either to the short form ERISA notice that we have offered a alternative or a full summary plan description.

If employees are not receiving one or the other, essentially plan is not in compliance with the Department of Labor's regulat interpreting ERISA and they should notify the local Labor Departm office or our national office and indicate that to us.

Mr. GOODLING. Thank you.

I have no further questions.

Mr. DENT. In referring to the exemptions from prohibited tran tions, would you, in a memorandum, be able to identify those exe tions to which you referred to in the paragraph beginning at bottom of page 12 in your letter to me, and would you follow with a memorandum breaking down the 1976 exemption applicat received on a month-to-month basis as you did in enclosure your January 30, 1975, letter to us?

Mr. HUTCHINSON. We will do that for the record, and we identify them by date.

Mr. DENT. I want to thank you on behalf of the commitee. I sure that we will have full cooperation from the Department.

Mr. HUTCHINSON. Thank you, Mr. Chairman.

Mr. DENT. The next witness is Robert Georgine, president, Buil and Construction Trades Department, National Coordinating Com tee for Multiemployer Plans.

Mr. Georgine?


ran, legislative representative for the committee and Gerry Feder, our labor counsel to the coordinating committee.

Mr. Chairman and members, once again I want to express my deepest appreciation for this opportunity to appear before the Subcommittee on Labor Standards. In appearing here today, I express the concerns of millions of participants in multiemployer plans with ERISA and its implementation.

We are all well aware of the many fine provisions in this massive and complex law. In many respects, the safeguards so carefully enacted by you and your colleagues have already begun to remedy some of the more significant abuses in the field of employee benefits.

As we have stated before, however, in some significant respects, the law and its implementation interfere with the ability of our multiemployer plans to protect the interests of our participants.

These serious defects must be remedied by legislation, by regulation, and, in some cases, by both. With these thoughts in mind, I would like to discuss briefly some of the more significant problem areas.

With respect to prohibited transactions, at the outset, I want to note that the administration has finally begun to utilize the cumbersome exemption procedure to relieve plans of some of ERISA's unintended roadblocks to effective plan administration.

On March 26, 1976, the Department finally published the first final exemptions for multiemployer plans under ERISA. The exemptions covered the areas of delinquent employer contributions, construction loans, and the sharing of office space, administrative services and goods between plans and parties in interest.

Generally, I commend the Department of Labor and the Internal Revenue Service for exemptions in two of those three areas which were significant improvements over the original proposal. However, I must note that the exemption for construction loans is, in my judgment, unwisely and unnecessarily harsh on the trustees of multiemployer plans in the construction industry.

The exemption permits construction loans but only if they are made by banks, insurance companies, or savings and loan associations. It prohibits the trustees, themselves, from making the same type of loans, regardless of how wise an investment it might be.

In addition to these exemptions, the agencies advised me in February that it was their intention to deal with each of the classes of transactions which I had brought to their attention. Altogether, I had specified 37 types of transactions for which relief was necessary. The agencies prepared a chart demonstrating how they intended dealing with each of these classes of transactions.

I would like to submit for the record our identification of transactions and the agencies' response.

[The documents referred to follow:]

74-924 0-76-3


National Coordinating Committee for
Multiemployer Plans


July 7, 1975



This memorandum further identifies, to the ex

tent possible at the present time, classes of transactions among multiemployer benefit plans which may be in violation of Sections 406 or 407 (a) of E.R.I.S.A.


include legitimate transactions which should be brought out from under the shadow of violation of the law, either by construction of the Act or by exemption.

Defined more precisely, these classes of transactions involve pension or welfare plans maintained by two or more unaffiliated employers pursuant to one or more collective bargaining agreements. These classes should be exempt from Sections 406 and 407 (a) of E.R.I.S.A.

An exemption would not relieve a fiduciary of his responsibility, under the Act or under the Internal Revenue Code, to discharge his duties respecting the plan with prudence and solely in the interests of the plan's participants and beneficiaries.

A. Delinquent Contributions

The collection of delinquent contributions is a

continuing and serious problem for multiemployer plans.

Without detailing, in this paper, the nature or extent



of the problem,

suffice it to say that the collection

process is an extension of the collective bargaining process and is one which may involve hundreds and even thousands of employers for many multiemployer plans. The process includes ascertaining the amount of the delinquency and in some cases the identity of the delinquent contributor, taking steps to collect the delinquent contribution which may include some or all of the following: finding the contributor, arbitration, collection attempts by the union, by an employer association, the plan or a fund serving solely as a collection-and-allocation intermediary, referral to a collection representative or agency. It may involve collection on a bond posted to cover delinquency or payment out of an escrow account established to cover delinquency.

For a more complete explanation see comments on proposed exemptions submitted by the National Coordinating Committee on Multiemployer Plans on June 30, 1975.

« PreviousContinue »