Providing for Consideration of Senate Amendment to H.R. Shiloh National Military Park Boundary Adjustment and Parker's Crossroads Battlefield Designation Act; Providing for Proceedings During the Period From December Through January 2019

Floor Speech

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Ms. FOXX. Mr. Speaker, I commend Chairman Brady and Leader McCarthy for their work related to the retirement security title of this bill, which includes significant and long-overdue reforms that expand access to workplace retirement plans, improve participant savings, and increase transparency in those plans.

The Ways and Means Committee and the Committee on Education and the Workforce have a long history of working together to improve and strengthen America's employer-sponsored retirement system.

Given our shared jurisdiction over many of these matters, each Committee brings a unique perspective to the table, further strengthening the resulting legislation.

The House Amendment to Senate Amendment to H.R. 88--Retirement, Savings, and Other Tax Relief Act of 2018 includes many reforms that have benefited from the work of both committees. Several provisions were the subject of a hearing in the Education and the'Workforce Committee earlier this Congress, such as the authorization of open multiple employer plans, and the clarification of an existing safe harbor for offering annuity products in a defined contribution plan.

However, the Retirement, Savings, and Other Tax Relief Act of 2018 overreaches by including a provision allowing for premium reductions for certain cooperative and small employer charity pension plans (CSEC plans), an issue which falls entirely under the jurisdiction of the Education and the Workforce Committee, and which stands in stark contrast to the spirit of this otherwise sensible legislation.

As Chairwoman of the committee of jurisdiction, I welcome this opportunity to provide background on the cooperative and small employer charity premiums provision.

In 2006, Congress passed the Pension Protection Act, which included provisions to improve the funding of defined benefit pension plans sponsored by a single employer, in order to ensure the solvency of these plans and the retirement security of plan participants. The law exempted certain entities from these improved plan funding requirements.

The Pension Protection Act also increased insurance premiums paid to the Pension Benefit Guaranty Corporation by single-employer plan sponsors because the PBGC-administered single-employer insurance program was under extreme stress--it had gone from a $7 billion surplus in 2001 to a $22 billion deficit in 2005. Unlike the Pension Protection Act funding rules, the increased PBGC premiums applied equally to all single-employer plan sponsors.

Mr. Speaker, PBGC premiums for single-employer plans take two forms-- a flat-rate, per participant premium; and an additional risk-based variable rate premium. While plan sponsors cannot control the level of the flat-rate premium, they have complete power over the amounts owed for the variable rate premium.

The variable rate premium is higher for severely underfunded plans than for well-funded plans, reflecting the higher risk underfunded plans present to PBGC, which steps in to pay benefits if a plan terminates. If a plan sponsor improves the funding of its plan, then its PBGC premium levels will go down.

The structure of this variable rate premium not only prevents sponsors of well-funded plans from subsidizing the benefits of other companies' employees, but also serves as an additional incentive for all plan sponsors to fund their plans properly.

As such, this variable rate premium is an especially crucial incentive for proper plan funding in certain cooperative and small employer charity plans that are exempt from the Pension Protection Act's more stringent funding rules.

For 2018, all single-employer plan sponsors pay a flat-rate premium of $74 per participant, and a variable rate premium is assessed at 3.8 percent of a plan's unfunded vested benefits, capped at $523 per participant. In exchange, the PBGC insures benefits up to $67,295 annually for a 65-year old retiree.

Now, a number of organizations that already enjoy funding relief under current law have asked for an additional reprieve from premiums that protect their workers' pension plans.

The bill before us grants certain groups this additional break--both the flat-rate premium and the variable-rate premium are reduced exclusively for these entities to pre-Pension Protection Act levels. While all other single-employer plans would continue to pay the current premium amounts, these plans would pay only a flat-rate of $19 per participant and a variable rate premium assessed at 0.9 percent of a plan's unfunded vested benefits. Further, the provision allows these plans alone to use higher interest rates to assume higher funding levels when determining premium amounts, while other single-employer plans must use long-standing specified assumptions that result in more sound funding estimates. As a result, many underfunded CSEC plans would not have to pay any variable rate premium under this provision.

Funding levels in many plans that would qualify for premium relief under this provision have fallen in recent years, resulting in increased risk-based variable rate premiums. According to PBGC data, for purposes of determining the variable rate premium, the plan sponsored by Girl Scouts of USA was only 64 percent funded in 2017--but as noted above, this provision would allow the plan to assume a 76.6 percent funding level; the Boy Scouts plan was only 75 percent funded in 2017, but under this provision the plan could assume 88 percent funding. Other plans are in a similar situation. For example, in 2017 Hawkeye Insurance Association was only 56 percent funded and Lincoln Center for the Performing Arts' plan was only 58 percent funded.

There has been a trend in recent years of certain companies and organizations looking to pension policies for financial relief when they are confronted with difficult situations. Congress should not set the precedent that when a company faces hard times, it can turn to its employees' pensions for a quick fix.

Federal pension laws must reflect the purpose for which pension promises are made--they are not offered gratuitously, but as a form of compensation to employees. As such, any changes to federal pension laws should have a long-term, sustainable focus, taking into account all parties, and especially the interests of workers and retirees.

Employees of charitable organizations often make great personal sacrifices to do important work that benefits local communities; as much as anyone, these employees deserve a sound pension system and a secure retirement.

Once pension promises are made, workers must be able to rely on them being kept.

The current variable-rate premium puts the responsibility for premium levels in the hands of plan sponsors, and rewards plan sponsors that care for their employees by maintaining well-funded plans; it additionally serves as a strong disincentive for sponsors to allow their employees' plans to fall to dangerous funding levels. In the aggregate, cooperative and small employer charity plans that would qualify for premium reductions under the bill are underfunded by about $5 billion according to PBGC.

A premium reduction benefiting a select few, as provided for in this bill, hands a select group of employers the same insurance at a lower price, at the expense of other employers that also sponsor single- employer plans. Under this provision, PBGC would lose over a billion dollars in premium revenue over the next ten years.

It allows a select group of employers to minimally fund promises made to their employees without consequence. Because these groups are exempt from Pension Protection Act rules designed to result in higher plan funding levels, the variable rate premium plays an important role in policing funding levels. PBGC estimates that it is likely that no cooperative and small employer charity plan would owe variable rate premiums under this provision.

Finally, this cooperative and small employer charity provision sends the wrong message to workers and retirees that when it comes to pension policy, Congress is willing to tip the scales in favor of certain employers over the retirement security of their employees.

Because the good in the bill before us today as a whole outweighs the harm of this one provision, I will be voting yes on the underlying bill. But my ``yes'' vote on this bill is not an endorsement of the CSEC provision which I strongly oppose for the reasons I've just discussed.

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