Hearing of Subcommittee on Retirement Security and Aging - Statement(As Prepared)

HEARING STATEMENT [AS PREPARED]: SUBCOMMITTEE ON RETIREMENT SECURITY AND AGING

Good morning. I would like to welcome everyone to the first hearing of the Subcommittee on Retirement Security and Aging. I look forward to an active hearing schedule, both in the area of pensions and aging issues. I also look forward to working with Ranking Member Mikulski again. We last worked together on aging issues in the 106th Congress when we collaborated on the reauthorization of the Older Americans Act.

Today, we will look at the Pension Benefit Guaranty Corporation (PBGC) -- the agency charged with insuring the defined benefit pension plans. The agency's deficit sits at $23 billion right now and there have been some spectacular pension plan failures in recent years that have greatly worsened its financial position.

The Administration has proposed a combination of higher premiums to be paid by plan sponsors and higher funding standards as a means of reducing the under-funding in the system. With this hearing, we will address several questions. What is the correct level to which we should increase PBGC premiums? What is the optimal level of increased funding that will result in better funded plans without forcing the plan sponsors to abandon their plans or declare bankruptcy and yet protect the financial integrity of the PBGC? I stress that last phrase -- "protect the financial integrity of the PBGC" -- because a taxpayer bailout of the PBGC is not an option.

We will hear from Mr. Bradley Belt, Executive Director of the PBGC. Welcome Mr. Belt.

On our second panel, we will hear from Mr. Ian MacFarlane of Medley Global Advisors. Mr. MacFarlane will tell us about the experience in the United Kingdom with pension reform, pension insurance agencies, and the impact recent changes there have had on the viability of the pension "schemes," as they call them.

Next, we will hear from Sallie Bailey, Vice President for Finance of the Timken Company of Canton, Ohio. Welcome. She will give us observations of the Administration's proposals to increase PBGC premiums and funding standards from the plan sponsor perspective.

Our last two witnesses will be Mr. Ron Gebhardtsbauer, former Chief Actuary of the PBGC and now the Senior Pension Fellow at the American Academy of Actuaries, and Mr. Alan Reuther, Legislative Director of the United Auto Workers. Welcome to you both.

I would like remind the witnesses that your oral comments should be limited to five minutes. There will be time for questions and answers at the conclusion of the panels.

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