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Sept. 6, 2000 CWA (Communications Workers of America/AFL-CIO) hand-delivered the following letter today to Senator Roth and the Senate Finance Committee:
The Honorable William V. Roth, Jr. Committee on Finance Dear Mr. Chairman: I am writing to make you aware of concerns that the Communications Workers of America (CWA) has with certain provisions included in the pension and retirement reform reconciliation bill that the Senate Finance Committee is expected to mark up tomorrow. While CWA supports a number of the reforms which this legislation would bring about, we are worried that certain aspects of the measure could be detrimental to the retirement security of American workers, including many members of our union, most of whom participate in defined benefit pension plans. First, CWA is concerned regarding the language directing the Treasury Department to promulgate regulations allowing plan amendments that would decrease certain accrued benefits. We are given to understand that the intent of this language is to allow plans to eliminate administrative problems and costs by removing plan provisions that may apply to few, if any, participants and have little or no financial value to any participant or participants. Unfortunately, the language as written is not nearly so limited in scope. As such, it has provoked legitimate fear that the provisions of ERISA that prohibit the reduction of accrued benefits, including those governing early retirement subsidies, will be significantly modified. If the goal is to allow the clearing away of out-of-date distribution options or other such limited changes, the language must be modified to clarify this intent. Second, CWA is concerned with language that would set standards for the conversion of traditional defined pension plans to so-called cash balance plans. As we understand the intent of this language, such conversions would be required to recognize the full value of a participant s accrued benefits to date. This would prevent what has been called the wear away of accrued benefit levels in which future benefits are not increased with future service until they exceed the level attained prior to the conversion. However, while the Administration s proposal in this area included the value of early retirement subsidies in the determination of accrued benefits for this purpose, we understand that the Committee s draft does not include such benefits and only establishes a floor equal to the present value of benefits commencing at normal retirement age. Excluding early retirement subsidies is unacceptable. This is exactly the injustice that enraged IBM employees in 1999, one of the primary sources of the ongoing firestorm on the cash balance issue. On this same topic, we also believe that the questions of legality with regard to earlier conversions to a cash balance plan design should receive their day in court. Several suits and other proceedings are currently underway. This legislation should not approve past controversial conversions retroactively. I hope that this important legislation will be modified to address these concerns. Thank you for your consideration in this matter. Yours truly, Morton Bahr President cc: Members of the Senate Finance Committee
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