Fair Minimum Wage Act of 2007--Contiunued

FAIR MINIMUM WAGE ACT OF 2007--Continued -- (Senate - February 01, 2007)

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Mr. GRASSLEY. Madam President, I wish to speak briefly on a revenue provision contained in the minimum wage bill. Senator Baucus and I worked closely on the tax bill, both on the provisions providing relief to small businesses affected by the minimum wage but also the offsets that made sure the package was in balance.

One of the offsets, that dealing with limiting the amounts of annual deferrals under nonqualified deferred compensation plans, has attracted some concern and raised some questions.

I thought it would be useful to my colleagues for me to provide a brief sketch of where we have been on this issue. The issue of nonqualified deferred compensation came to the attention of the Finance Committee in response to the Joint Committee on Taxation's investigation into Enron--done at the request of the Finance Committee. The Enron report highlighted a number of abuses by top executives involving nonqualified deferred compensation.

In the American Jobs Creation Act that Congress passed in 2004, there were included provisions that limited deferred nonqualified compensation plans. In brief, the legislation limited when and under what circumstances distributions could be made.

More recently, in the Pension bill passed last year, Congress restricted funding of nonqualified deferred compensation plans if the employer had underfunded certain other retirement plans.

In addition, the Finance Committee last September had a hearing that looked closely at executive compensation that covered a wide range of pay issues involving top employees.

As my colleagues can see, the issue of executive compensation and particularly nonqualified deferred compensation has been of long-standing interest for the Finance Committee. I expect that these matters will continue to command the attention of the committee this Congress.

The majority of concerns that have been raised about this most recent provision contained in the minimum wage bill is its possible impact on middle management. I appreciate those calling for caution. The Finance Committee's Republican staff is reviewing the legislation and seeking to get more and better numbers about who is affected by this legislation. In addition, there have been bipartisan discussions at the staff level.

In discussions with Joint Committee on Taxation I have asked them what would be the impact of eliminating the 5-year average compensation limitation so that the aggregate amounts deferred under a nonqualified deferred compensation plan would be limited to $1 million annually.

JCT informs me that this would reduce the current $806 million score by less than $100 million--so it would only be a small shave off the score. This suggests to me, that the vast majority of individuals--90 percent--who would be affected by this reform are among the wealthiest--i.e., those individuals receiving more than $1 million annually in nonqualified deferrals. I hope this information will help inform members as we discuss this matter in the near future.

Finally, I think it is important for members to bear in mind that ERISA does not apply to so-called ``top hat' plans, these top hat plans being those for top management. There is a concern that if a nonqualified plan is widely applicable, as widely applicable as some of the opponents of this provision contend, it raises other red flags.

The issue raised is the fact that a widely applicable plan should be treated as an ERISA plan. If these widely applicable nonqualified deferred compensation plans are actually ERISA plans, they then should come under the protections that Congress has put in place under ERISA to provide workers retirement security.

I will continue to look at this provision and bear in mind the issues raised by my colleagues.

Madam President, we are finishing up debate on the Senate minimum wage/small business tax relief bill.

The Senate invoked cloture on the Baucus substitute amendment. It contained two basic components. The first one is the proposed increase in the Federal minimum wage. The second component is tax incentives to assist workers and businesses burdened by the increased Federal minimum wage. That part of the package was approved, on a bipartisan basis, by the Finance Committee late last month.

Now, by approving the Baucus substitute on an overwhelmingly bipartisan vote, the Senate has made its will clear: a minimum wage increase must be linked to small business tax relief package.

In the normal course of events, after Senate passage, the amended House bill would either go into conference or go back to the House as amended. We call the latter procedure ``pingpong.'

Since tax matters were linked and the House bill doesn't have tax provisions, the House Democratic leadership and tax writers have threatened to send the Senate bill back to the Senate. They will claim that they are protecting prerogatives of the House.

We find ourselves stuck on minimum wage because the House Democrats have threatened to use the ``blue slip' procedure.

So, no one should be mistaken. It is House Democrats, not Senate Republicans, who are delaying passage of the minimum wage.

If House Democrats send us a suitable revenue bill, Senate Republicans will be ready to move expeditiously to the next step. Right now, we can not move.

Now, if the House Democrats send us a minimum wage-related revenue bill, what happens next?

That is up to our Democratic and Republican leaders.

There are two basic avenues to take. One is a conference. The other is to amend the House revenue bill back with the Senate-passed bill and send it to the House.

On tax bills, we have used both approaches over the last few years. For instance, the Hurricane Katrina tax relief measures never went to conference. On the other hand, we had conferences on the tax relief reconciliation bill and the pension bill.

Still another approach would be for the House to combine its minimum wage bill with the Senate tax relief package and send it over here. That route, though unusual, has also worked.

In this case, I have indicated to my Republican leadership that I am wary about the conference option.

The Senate Democratic leadership only came to linking minimum wage with small business tax relief after Chairman Baucus relayed the Republican position to them. It took a cloture vote to prove Chairman Baucus right.

So, if we go to conference, the Senate Democratic leadership and House Democratic leadership might be perfectly willing to scrap the Senate's position.

Apparently, at a pen and pad session with reporters today, the majority leader indicated as much. He told reporters he wanted a ``clean' minimum wage bill to come out of conference. Now, I am told the majority leader's press operation has attempted to change the impression those remarks left.

Let's just say I am reasonably suspicious of those kinds of ``clarifications.' Apparently, the majority leader also said he would be prepared to dare Republicans to filibuster a clean minimum wage conference report. By ``clean,' he appears to be referring to the term used by House and Senate Democratic leadership to mean no linked small business tax relief.

Make no mistake--the easiest and quickest way to send a minimum wage bill to the President would be for the House to send the Senate a bill identical to the Senate-passed bill.

An alternative quick option would be for the House to send us a revenue bill and the Senate would amend the bill and send it to the House. The House could then send the bill to the President's desk.

The conference option could be troublesome. It could be drawn out. Or, it could be a way for the House and Senate Democratic leadership to subvert the Senate position. That would not be a good way to start out the new session. In a conference setting, it would mean the Senate Democratic leadership acting in a manner that is at odds with how it said it was going to conduct business.

I counsel my leadership and the Democratic leadership to consider my concerns about the next step.

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Mr. GRASSLEY. Madam President, after great effort by many people, the Senate has adopted the Fair Minimum Wage Act as amended by the Baucus substitute amendment containing the Small Business and Work Opportunity Act of 2007. This bipartisan small business package will help ensure that small businesses are able to cope with an increase in the minimum wage.

Credit must go to the dedicated members of my staff, who spent many hours helping to put this package together. Kolan Davis, Mark Prater, Dean Zerbe, Elizabeth Paris, Chris Javens, Cathy Barre, Anne Freeman, Grant Menke, Stanford Swinton, and Nick Wyatt showed great dedication to the tasks before them.

Of course this package could not have been put together without the efforts of Chairman Baucus and his staff. I particularly want to thank Russ Sullivan, Bill Dauster, Pat Heck, Judy Miller, Rebecca Baxter, Melissa Mueller, Pat Bousliman, and Ryan Abraham.

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