More on Anderson's Carbon Tax
Employee Advocate – www.DukeEmployees.com – April 15, 2005
A reader sent in these follow-up comments about the Paul Anderson carbon tax proposal:
Below are two events that happened within a tiny time window. Did this prompt Anderson to action?
March 30, 2005 (note date); http://www.ceres.org:
"The Implications of Climate Risk for Fiduciaries and Fund Managers: What Investors Need to Know.
“Electric utility companies, poised to invest in new power plant facilities costing hundreds of millions of dollars, are at risk of substantial stranded costs. This point was made loud and clear in a recent climate risk report prepared by the nation's largest electric power provider, American Electric Power.
“The electric utility sector and auto sector stand out as key areas of concern. Many companies and investors also recognize that positive and proactive measures to address global warming can also capture significant benefits for shareholders. Companies with clean technologies or approaches may seize new markets or market share.”
Please note the Ceres report was seven days before Anderson's "noble" call to action: Duke Energy CEO Proposes Carbon Tax Associated Press (Thu, Apr 7) (note date).
Mr. Anderson made this look like his idea. No doubt, this is a great idea but the company needs to pay for their own infrastructure. If a rate hike to their customers is needed we have a process for justifying that. Anderson's desire is that the tax payer foot the bill. Being proactive is great as long as you are financially responsible and mature about the issue.
Mr. Anderon also took us back to school on dime store psychology on this one. He says he cannot get this pushed through during the Bush watch. Have we ever seen our beloved President stand against any bill that has
produced negative implications for the little people? With a Republican controlled House and Senate and a President who is nothing more than a "Water Boy" for Corporate America, I would say this in prime time to get
Anderson's carbon bill pushed through.
Mr. Anderson may get his way with this but I don't think it will be a walk around the park. AARP members need to know his bill will affect the quality of their retirement ... but not his. You are slick Mr. Anderson but we are on to you boy!
A concerned reader
Paul Anderson’s Tax Proposal
Bill Coley, Bill Grigg, and Rick Priory
Employee Advocate – www.DukeEmployees.com – April 10, 2005
A reader sent this comment on Bill Coley and recent events:
Looks like to me, since I know what kind of guy Bill Coley is, that Grigg's love affair with Priory was a terrible mistake. The only thing I regret is that British Energy got the "good guy," Coley, and we got Priory and his hang-ons, who don't care about employees or the company. We lost; British Energy won!!!!!!
Bill Coley is the CEO of British Energy
Paul Anderson’s Carbon Tax Proposal
Employee Advocate – www.DukeEmployees.com – April 9, 2005
The comments below were sent in by a reader concerned about Paul Anderson’s "carbon tax" proposal:
Anderson's Carbon Tax
It appears the citizens will again be punished for the recklessness of our major corporations. Mr. Anderson has blindsided us with his intentions of lobbying for a "carbon tax." This is just Dandy. Our air and streams are already polluted beyond repair with such agents as COx, NOx, and MERCURY. Now that the damage is done we, the average Joe, is called to "do their part" in correcting all of the decades of corporate polluting of our environment. Mr. Anderson thinks "we" should now step up to the plate and pay higher prices for the following - cut and paste:
"Anderson acknowledged a national carbon tax would mean bigger utility bills and higher prices at the gas pump for consumers. But unless industry leaders take the lead, he said, the long-term outcome could be even more disastrous."
After decades of profits, high salaries and lavish living the corporate leaders now want us to pay for their reckless environmental deviance. The mercury emissions will also benefit from the carbon law. Mr. Anderson has a good idea and it is noble that one would step forward and call for more accountability concerning our environment. He just needs to drop the bill in the right mail box and not in the laps of consumers. Profits should be made in a responsible manner factoring in the necessary components such as waste management. Why do the elite feel they should travel to their various estates around the world in their private jets and feel the consumer should foot the bill for their oversights? Below is another cut and paste which has prompted this call to lobby:
“Mercury (Hg) is a toxic metal that causes severe neurological damage in humans, particularly in fetuses and young children. Regulators want to control emissions from utility powerplants, which emit 48 tons of mercury annually, the country's single largest source of mercury pollution. The United States has about 1,200 coal-fired power plants, many built in the 1960s.
We can see from the amount of pollution placed in our environment why this is front and center for Utility Companies. We need to do some lobbying and stop this bill (as it is now proposed) in its tracks. The American people do not need any new taxes - we can barely afford health care. Corporations need to pay for their own infrastructure upgrades. The SEC needs to get involved with this also. They have a way of allowing for this by taking part of the profits and stock price increases we tought at our stockholder's meetings. Perhaps this would be of interest to folks like Ted Kennedy and Eliot Spitzer. It is bad enough to breath and eat corporate pollution without being asked to pay for the cleanup.
“One promising technology for eliminating mercury from utility smokestacks is Activated Carbon Injection (ACI), a state-of-the-art technology that removes 80 percent of the mercury from stacks. It is being tested at Gaston 3, a coal-burning power plant located in Alabama owned by Southern Company.”
From a Concerned Citizen
Paul Anderson’s Tax Proposal
Health Care Letter to Congress
Employee Advocate – www.DukeEmployees.com – February 17, 2005
This letter was sent to senators and congressmen:
Do not allow the Equal Employment Opportunity Commission (EEOC) to legalize age discrimination against retirees. Retirees are entitled to the full health care benefits that they have earned. The EEOC should not allow corporations to renege on paying these people what they have earned.
Retirees should not lose their earned health benefits just because they turn age 65. The EEOC has forgotten its duty to protect citizens from age discrimination. Under the Bush administration, the EEOC has turned into a promoter of age discrimination.
Last year, Congress rejected age discriminating portions of the Medicare bill. Section 631 of the bill originally would have given corporations the green light to dump all retiree health benefits to those eligible for Medicare. The offending portion was deleted from the final bill after numerous complaints from the public.
The Bush administration is again trying to circumvent the law through corporation-serving regulations.
EEOC Encourages Age Discrimination
Do Not Privatize Social Security
Employee Advocate – www.DukeEmployees.com – February 17, 2005
This letter was sent to senators and congressmen:
Reject the attempt to privatize Social Security. The scheme will not help citizens.
It will only:
Guarantee less benefits to retirees,
Put more money into the coffers of investment firms, and
Drive up the budget deficit.
The Bully's Pulpit
Newspaper’s Letter to Ruth Shaw
Employee Advocate – www.DukeEmployees.com – February 5, 2005
This full-page letter was published in the January 26, 2005 edition of News@Norman:
Urgent Message to Ruth Shaw,
President and CEO
Duke Power Company
January 26, 2005
On Monday morning, January 24, 2005, the temperature dropped to 13 degrees (and lower) in our community. Shortly after 6:30 a.m., thousands of businesses and residences lost their electric service, something that unfortunately has become commonplace in Denver. Rock Springs Elementary School was cancelled, businesses were forced to shut down, and residential customers were faced with the coldest morning of the winter without heat. The economic loss to our community cannot be measured, and neither can the hardship caused to families who too often have to readjust their work schedules and lives to accommodate unreliable electric service.
For years we have had numerous widespread power outages in the Denver area, and promise after promise from Duke Power that our fast-growng community will have major service upgrades. Obviously, that still has not occurred.
We are tired of excuses. We want action. Please give us reliable electric service now!
Clip and Mail this Page To:
Ruth Shaw President, CEO
Duke Power Company
PO Box 1090
Charlotte, NC 28201-1090
Duke’s Ads Fail to Brainwash Customers
The Next BIG Problem
Employee Advocate – www.DukeEmployees.com – January 17, 2005
The message below was received from a reader who is not too happy with Duke’s latest healthcare tinkering. Be forewarned to verify your doctors’ contractual relationship with BCBS.
I think that the retirees and active Duke employees will find we have inferior health coverage now that BCBSNC is the administrator. Contrary to the claim made by Christopher Rolfe that we will have more choice of in-network providers (600,000) and facilities (60,000), I have found a growing number of medical service providers in South Carolina will not contract with BCBSNC. This is especially true of medical specialist.
I have made a comparison of in-network specialist providers in my area listed under our old plan administered by Medcost and the numbers of like specialist providers in the Blue Cross network. I found fewer doctors are willing to accept the lower fees offered by BCBSNC. I am sure she exaggerated to make her point, when a member of my Urologist staff told me that BCBS had not revised their (reasonable and customary) fee schedule in ten years. Many good, established local doctors will not work with them.
I also found as a punishment to the doctors leaving the BCBSNC network, this insurer will not send reimbursement checks to the provider, even when the reimbursements are assigned to the provider by the patients. As an out-of-network patient, I would need to pay them for future services at the time they are rendered.
I was scheduled for a procedure the first week in 2005. I received the following letter:
“Presently, Oconee County does not have a Urologist listed in this Blue Cross network.”
Now, I will need to find another doctor in Anderson or Greenville who will accept me and the BCBS fee, or pay more out of pocket.
Perhaps Duke used the money they saved by switching to BCBSNC to pay the $207.5 million to settle the California power case.
A Letter to Donald Rumsfeld
Employee Advocate – www.DukeEmployees.com – December 24, 2004
Steve Stoeckel, musician and electronics technician, sent the letter below to Donald Rumsfeld. It was published in The Charlotte Observer.
My Sons Won't Fight Your War
Dear Mr. Rumsfeld,
I noticed recently that National Guard recruitment levels are down, and I'm sure you know why, though you'd be loathe to admit it: It's difficult getting young people to sign up to be sent to the front lines in Iraq. There are some young people I'm particularly worried about -- my sons -- and this letter is to inform you that when you reinstate the draft, you can't have them. I simply won't let them go fight your splendid little war.
I can visualize your face at this point in my letter -- that unpleasant squint you get when you're about to deliver a lecture always reminds me of a supercilious school principal I once had -- and before you start educating me on duty and sacrifice and principles, I need to tell you that I've heard it before from one of your predecessors. I've been around a long time, you see, and phrases such as "winning the hearts and minds" or "turning the corner" or "the light at the end of the tunnel" aren't as fresh for me as they are for the younger people you're trying to attract.
The predecessor I speak of was Robert McNamara, one of the best and brightest, as they used to say. Mr. McNamara was as convinced of his worldview, his mission, as you are, and it took him 30 years to admit what I knew at 17: He was, in his own words, "terribly wrong." It has taken me quite some time to forgive McNamara, even after his apology, but I have done so.
I was lucky all those years ago -- I had a high lottery number and didn't have to go to Vietnam (not that I would have anyway). So many weren't as lucky, including two of my friends who made it back but committed suicide because of the problems that followed them home.
Today what worries me the most, Mr. Rumsfeld, is this: McNamara was a fairly young man, brilliant and superbly educated, when he entered the small circle of men that would shape our destiny for years to come. His reasoning and opinions presumably would have been less susceptible to groupthink and the rigidity of thought that sometimes comes with years of policymaking in back rooms. That wasn't the case, of course, and if it took him nearly three decades to figure out that he was confusing wrong, rigid thinking with principle, what am I to make of you at the age of 74 spouting the same nonsense? You don't have 30 years left, and I have my sons to worry about.
They are smart, kind-hearted boys, and I have told them that when the draft comes (and please, let's not make any more false promises, shall we? The election is over), I will do anything I can to make sure you don't get your hands on them.
If the first part of this letter gave you the impression that I'm not a fighter, I hope that the previous sentence makes this abundantly clear: I will fight for the things I believe in. You, Mr. Rumsfeld, and your war don't fall into that category.
9/11 Warning Was Ignored
Comments to John Kerry
Employee Advocate – www.DukeEmployees.com – July 16, 2004
John Kerry and John Edwards have solicited concerns from the public. The message below was sent to John Kerry on July 15, 2004:
The employees where I have worked for many years (Duke Energy) have had their pensions and retirement health care ripped off. Workers lost retirement money due to a devious cash balance pension plan conversion.
To make matters worse, the Bush administration has perverted the federal agencies, that are supposed to be employee advocates.
Under Bush, The Treasury has tried to exempt corporations from pension age discrimination laws.
Under Bush, the EEOC has promoted retirees losing their earned private health care.
Under Bush, The EPA has weakened environmental laws, to further enrich corporations.
Under Bush, the Labor Department has worked feverishly to take away workers’ overtime pay.
Under Bush, corporations own the federal government!
If elected, will John Kerry and John Edwards work to reverse this sorry trend?
Will federal agencies designed to protect employees stop aiding and abetting corporations?
Will workers actually collect the pension and health benefits that they have earned?
Will federal agencies protect the environment, instead of only protecting corporations?
Will the military be used only for national defense and not for settling family feuds?
You may send you own comments by using the link below:
Duke Cash Balance Plan Comment
Employee Advocate – www.DukeEmployees.com – July 15, 2004
Below is a cash balance plan comment received:
While we all agree that Paul Anderson is the best leader since Bill Lee, during the new Open Forum this week, he commented that Duke has on hand a surplus of two (2) billion dollars in cash awaiting an opportunity to use it. It seems this is a perfect opportunity for Duke to step up and take the high road and restore employee confidence and loyalty by making the needed (appropriate and not age discriminatory) adjustments to the RCBP conversions.
June Open Forum
Outsourcing of Jobs
Employee Advocate – www.DukeEmployees.com – May 27, 2004
This message was received from an “outsourced” Duke Energy employee
We hear much on the news about how the American worker can prevent their jobs from being outsourced. Politicians rush to offer their help if we vote for them. Those already in office promise to limit the workers exposure if we re-elect them. Some applaud the concept of globalization as being the answer to a more prosperous America if globalization is allowed to flourish. We somehow feel we must rely on elected officials, many who are bought by big business, yet we neglect the ONLY SOLUTION for this dilemma. The answer is to JOIN THE UNION. That is the only answer. A strong union will keep the most devious company in step.
Duke Energy recently outsourced their facility maintenance activities to an outside company and the only reason they could pull that off is because the maintenance staff had no interest in JOINING THE UNION. Duke management stripped them of their employment, benefits, and retirement simply because they failed to partition to be represented. Since that time several first line managers have commented that they secretly like the union because it protects their jobs. As long as they have employees to manage they will have a job. A job that pays them well because of the UNION. They will probably have a job anyway based on the number of managers DUKE retained and created who once managed the maintenance staff. I wonder what they are doing now?
JOIN THE UNION or you may wind up HISTORY like the maintenance group. Do it NOW. Your financial welfare is depending on this. Call your local union official immediately before time runs out for you.
Employment and Health Security
Duke's Steamroller Stalled
Employee Advocate – www.DukeEmployees.com – May 16, 2004
These Citizens Fought the Duke Steamroller for Years
Subject: Duke Energy Power Plant Offline!!!!!!! PASS ON!
Hey! Just got a fax from Hunton & Williams, Duke Energy's legal counsel in the Wythe Power Plant known as Duke Energy Wythe, LLC, the proposed 620 megawatt gas fired electric merchant power plant on the New
River at Foster Falls Recreation Area and the New River Trail State Park in VA. The National Committee for the New River (NCNR) and many other dedicated citizens of VA have worked hard of the last several years to
defeat this dangerous project that would have negatively impacted the health of the river, nearby citizens and a crown jewel of the State Park System in Virginia.
The fax reads:
As of May 13th, "due to current and anticipated conditions in the electric energy markets have led the Company to conclude that it should not proceed with the project. Accordingly, the Company by this Motion asks the commission to permit it to withdraw its Applications filed on December 27, 2001 and April 3, 2002."
How about that?!!!! Guess they didn't want to mention the fact that a small group of dedicated citizens got the together and raised a little Cain about their ill-fated plan and showed the VA Judge in the case that it was a TERRIBLE idea in the first place!
CONGRATULATIONS, Virginia! May Foster Falls and its surrounds always breath clean air and drink clean water.
Duke, we'll still sleep with one eye open.....
for the river,
National Committee for the New River
Citizen Victorious Over Duke
Employee Advocate – www.DukeEmployees.com – May 7, 2004
This message was received from a former Duke Energy employee:
I was recently laid off and the reason given to me was to "save money" and "it's just business." I recently heard that one of the regions has 5 million they "need to spend" for facility needs. This is the old trick; if you don't spend it, you will not be able to budget for it next year.
How are Mr. Anderson and Ms. Shaw allowing this, with their hawkish approach to business? I think it is high time they take a look at some of the dressed up, slick talking, do nothing management they have within their company. As a stockholder their salaries affect my return. Is this being looked at or have they chosen the route to only target the working stiffs?
Protect the Pensions of American Workers
Employee Advocate – DukeEmployees.com - September 4, 2003
A Letter From Congressman Sanders to Colleagues
During consideration of the Fiscal Year 2004 Transportation-Treasury Appropriations bill, we will be offering an amendment to protect the pensions of older workers who have seen their retirement benefits slashed by as much as 50 percent as a result of age discriminatory cash balance pension conversions. We urge that you vote in favor of this amendment. A vote in support of this amendment is a vote to protect the pensions of older Americans.
On July 31, 2003, a federal court ruled that IBM's cash balance pension plan violates federal anti-age discrimination law. The court found that IBM knew that older workers would lose up to 47% of their pensions under the cash balance conversion. This ruling was a welcome outcome for the 130,000 IBM employees who were represented in the case - and for the millions of other Americans whose employers have already converted to one of these age discriminatory plans or might in the future.
Despite this court ruling, it appears that the Treasury Department is still moving ahead with proposed regulations that would give the green light to the very cash balance pension plans that the court ruled are illegal. This is wrong.
That is why our amendment would specifically prohibit the IRS from issuing regulations that would conflict with this federal court ruling.
Over 300 members of the House have voted last year to urge the Treasury Department to protect older workers in cash balance pension conversions, and over 200 members of Congress recently wrote asking Treasury Secretary Snow to withdraw the proposed cash balance regulations that are at issue here.
Don't let your constituents be robbed of the pensions they have worked to earn their entire lives. Please support our amendment to protect pensions and to fight age discrimination. If you have any questions, please contact Warren Gunnels with Rep. Sanders at 5-4115.
Member of Congress
Congressional Cash Balance Plan Letter
Employee Advocate – DukeEmployees.com - August 22, 2003
August 22, 2003
The Honorable George W. Bush
President of the United States
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500
Dear President Bush:
On July 31, 2003, a federal court ruled that IBM’s cash balance pension plan violates federal anti-age discrimination law. This ruling was a welcome outcome for the 130,000 IBM employees who were represented in the case – and for the millions of other Americans whose employers have already converted to one of these age discriminatory plans or might in the future.
Late last year, the Treasury Department issued proposed regulations that would green-light cash balance plans. However, the decision of the federal district court in the Southern District of Illinois raises serious questions about the legality of those proposed regulations. As you are well aware, an administrative agency cannot change statutory requirements through regulations. Only Congress has that authority.
Given this, we are renewing our request that your Administration immediately withdraw the proposed Treasury Department regulations regarding cash balance pension plans. (Federal Register December 11, 2002, Internal Revenue Service, 26 CFR Part 1, REG-209500-86, REG-164464-02, RIN 1545-BA10,1545-BB79).
In January, we sent you a letter -- signed by a total of 217 Members of the U.S. House and Senate – urging the withdrawal of these same proposed Treasury regulations governing cash balance plans. We have included a copy of that letter for your further review.
As we stated in that latter we believe the regulations “would create an incentive for thousands of companies to convert to cash balance plans by providing legal protection against claims of age bias by older employees. The regulations would result in millions of older employees losing a significant portion of the annual pension they had been promised by their employer and had come to rely upon as part of their retirement planning . . . . Re-opening the floodgates for cash balance conversions will destroy what is left of our private pension retirement system. This is a devastating step that your Administration need not and should not allow.”
We believe that the policy arguments set forth in our January letter alone justify the withdrawal of the Treasury regulations at issue. However, the likely illegality of the regulations removes any question of whether they should go forward. They should not.
We deeply appreciate your attention to this matter. We trust that you will heed the concerns of the millions of Americans potentially benefited by this ruling and that you will see to it that the Treasury Department does not proceed with regulations in violation of federal law. We look forward to working with you to protect the pension security of America’s workers.
Bernard Sanders, Gil Gutknecht, George Miller, Sherwood Boehlert, Maurice Hinchey, John McHugh, David Obey, Rob Simmons, Rahm Emanuel, Jerrold Nadler, Carolyn Kilpatrick, Rosa DeLauro, Robert Wexler, James McGovern, Anibal Acevedo-Vila
Click the link below to read the January 31, 2003 letter:
Congressional Pension Letter to Bush
Employee Advocate - DukeEmployees.com - June 14, 2003
Response to Securities and Exchange Commission’s request for comments:
June 13, 2003
Thank you for requesting proxy rules and regulations comments. Anything that the SEC can do to give investors more control of the boardrooms will be a blessing to the American people.
Shareholders should be allowed to nominate corporate directors.
Most of the corporate scandals have resulted because the CEO's have too much power in the boardrooms. Many run the corporations as a dictatorship, solely for their personal gain. The SEC rules are used as a weapon to stymie any attempt of reform by shareholders.
If the rules were changed to make shareholder proposals binding on corporations, many current problems would be solved in short order.
The arrogant, rogue CEO has become a national joke. It is time for him to be placed under the strict control of his owners - the shareholders.
Cash Balance Letter from Congress
Congressman George Miller – April 1, 2003
Congress of the United States
House of Representatives
Washington, DC 20515
March 14, 2003
The Honorable John Snow
Secretary, US Department of Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
The Honorable Elaine Chao
Secretary, US Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210
The Honorable Cari Dominguez
Chair, Equal Employment Opportunity Commission
1801 L Street, NW
Washington, DC 20507
Secretary Snow, Secretary Chao and Chairwoman Dominguez:
We, the undersigned members of Congress, submit the following comments on Department of Treasury/Internal Revenue Service proposed regulations on Reductions of Accruals and Allocations Because of the Attainment of Any Age; Application of Nondiscrimination Cross-Testing Rules to Cash Balance Plans (Reg-209500-86, issued December 16, 2002) to strongly urge the Department of Treasury to withdraw its proposed regulations pertaining to cash balance pension plan conversions and re-issue revised proposed regulations that protect the pension promises made to long-serving employees.
Our nation’s pension system is at a critical juncture. Social Security, the bedrock of retirement income for most Americans, is under great political and financial pressure. Private pensions, which provide supplemental retirement income to approximately 25% of current retirees and are expected to provide retirement income to 50% of future retirees, are under severe stress.
The continuing weak economy and rising health care costs are pressuring thousands of large employers to reduce or consider terminating their traditional defined benefit pension plans. Defined contribution plans, particularly 401(k) plans, which once appeared to promise retirement wealth, are suffering from four consecutive years of negative investment returns and numerous corporate scandals, leaving the attractiveness of these types of plans for both employers and employees in question for the first time in more than a decade.
Given this environment of rising retirement insecurity, we were alarmed that the Treasury Department announced in December its plan to make it easier for companies to convert their traditional defined benefit plans to cash balance plans without specific requirements to protect older employees from a loss in pension benefits.
We strongly believe that the Treasury Department should not issue any regulations that will increase the risks and insecurity that employees face, including regulations that seek to address the issue of cash balance pension plan conversions under the guise of age discrimination regulations.
If the Department, and this Administration, is concerned with enhancing pension security, it should revoke the pending draft regulations and issue instead generally applicable regulations governing cash balance plan conversions, including provisions that would guarantee the right of vested employees covered under a defined benefit plan to choose to receive the benefits determined under the formula of the traditional defined benefit plan or that of the cash balance plan. The regulations should make clear that such a choice shall be made based on complete and accurate information about the impact of the different plans on that employee.
Cash balance pension plan conversions have been controversial from their inception. For many years, only a handful of large employers engaged in these conversions. However, beginning in the 1990’s, the pace increased - due in significant part to the popularity of 401(k) plans. Many large, profitable employers and pension consultants felt pressure to compete with 401(k)s.
Thanks in part to a series of Wall Street Journal articles, the public was alerted to problems with the manner in which conversions were being structured and learned how conversions masked the benefit reductions employees experienced. These articles gained the attention of Congress and the public. In the midst of the furor, IBM Corp. sought to convert to a cash balance plan after promising its workers their pensions would be secure. As a result of Congressional and public pressure, the Treasury Department imposed a moratorium on the issuance of determination letters approving conversions. The pending regulations at issue today would lift that moratorium.
Since the imposition of the moratorium, the General Accounting Office has reported that cash balance conversions can cut in half the value of an older employee’s pension benefits. The American Academy of Actuaries has reported similar findings. If the Administration does not revise its regulations to require special protections for older workers, it will be responsible for reducing the pensions and retirement security of millions of older workers.
We understand that this Administration is trying to respond to the enormous pressure it is under from private companies who wish to reap the savings that cash balance conversions would afford them. What we do not understand, however, is why this Administration does not appear to be concerned about the clear and present danger that cash balance conversions pose to older employees who, after dedicating years of loyal service to a company with the promise of a defined pension benefit, would find their benefits potentially cut in half under a conversion. The fact is, the pending regulations are unfair to older employees and therefore should be withdrawn and rewritten.
The Treasury Department should first and foremost bear in mind the purposes of the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code (Code) and the Age Discrimination in Employment Act (ADEA).
ERISA was enacted to protect the pension benefits promised to employees and retirees. The IRS Code’s pension provisions evolved from the common law of trusts and are based on the fundamental concept that pension trusts must be for the exclusive benefit of the participants and beneficiaries. The ADEA was enacted to prohibit arbitrary age discrimination.
Secondly, Treasury should consider that neither ERISA nor the Code recognize cash balance pension plans. The law only recognizes defined benefit or defined contribution (individual account) plans. The Treasury should be extremely circumspect in interpreting the law beyond the clearly expressed intent of Congress. Though Treasury and the other related agencies have authority to interpret ERISA, such regulations should adhere to the intent of Congress. And in an area in which Congress has not set standards nor asked Treasury to set them, it should be careful not to deviate from the letter or spirit of the law.
The post-65 accrual amendments to ADEA, ERISA, and the IRC, enacted as part of the Omnibus Budget Reconciliation Act of 1986 and upon which the Department seeks to issue regulatory guidance pertaining to age discrimination, were enacted to address specific injustices which came to the attention of Congress, none of which were related to or involved cash balance plans or conversions. Again, Treasury should be extremely circumspect in using a law enacted by Congress for a completely different purpose to “legalize” cash balance conversions, which as we just stated, are not even recognized under any of the applicable statutes.
Finally, taking the above comments into account, Treasury should examine and issue revised regulations that reflect the pressures facing both employers and employees. The regulations must reflect economic pressures on our private pension system, the likely effect of lifting the current determination letter moratorium, and the practical need for comprehensive rules governing cash balance plans and cash balance plan conversions.
As policy-makers, we understand the growing desire of employers to modify or terminate their traditional defined benefit pension plans. For many large employers, reduced profits and ongoing reduced rates of investment return make required pension plan contributions economically painful. Changing economic conditions have also changed attitudes toward traditional pensions.
But current law makes termination difficult. If Treasury were to permit conversions with few or no employee/worker protections (minimum standards/transition rules) and lift the moratorium, it is extremely likely that large numbers of employers would amend their plans. In fact, hundreds of companies were waiting to amend their plans when these regulations were announced in December, and we have learned that several hundred more companies have indicated their interest in converting since that time. Without a standard set of protections, millions of employees, primarily older employees, would lose promised pension benefits and would suffer increased anxiety about their ability to afford retirement for themselves and their families. Instead of narrowly focusing on the age discrimination provisions of ERISA, the Code, and the ADEA, Treasury should first develop a comprehensive set of standards for cash balance pension plans and for amendments converting defined benefit plans to cash balance plans. If Treasury determines that the issues raised by cash balance pension plans cannot fully be resolved by the Department because it does not fall sufficiently within the rules for defined benefit pension plans or raises other equity issues, then it should report to Congress and seek our guidance.
Treasury should be extremely reticent to promulgate final rules limited strictly to issues pertaining to age discrimination. Though Treasury has lead authority under Reorganization Plan #4 of 1978, age discrimination issues are more properly the purview of the EEOC. In no event should these regulations limit the authority or interpretation of the EEOC for the ADEA, which provides broader age discrimination protection than either ERISA or the Code.
In this context, the Treasury Department should revise its proposed regulations to address the following issues (we limit our comments to the major issues related to conversions):
No Loss of Benefits: Federal law and regulations should permit employers to make changes to their pension plans. However, those changes should not be permitted to reduce benefits already earned or to reduce accruals on the basis of age, and in the case of “unclear” cash balance pension plan and similar hybrid conversions employers should be required to afford vested workers the opportunity to earn previously promised benefits, i.e. require that they may receive the higher benefit formula upon reaching retirement age under the plan.
Most large companies have done this. In fact, Secretary Snow, you may recall that you stated that during your tenure at CSX and on the board of directors of Verizon Corp., you supported provisions to provide the choice of benefits to company workers.
Cash balance conversions overwhelmingly have been carried out by large profitable companies. These companies are able to and should be required to comply with a fair set of procedures for accomplishing these long-term objectives. Fairness dictates that vested participants who negotiated and served under the defined benefit plan should be permitted to continue to earn benefits under that formula if that is in their best interest. This rule should be viewed as a grandfather rule. Employers may convert their plans, if they grandfather current vested participants by allowing them the choice of the better of the two plan benefit accrual formulas.
A frequent refrain of employers and consultants is that the proposed regulations should provide flexibility. But, flexibility for employers cannot be allowed to cost employees a loss of benefits to which they had been promised. We suggest that the Department offer employers flexibility and protect employees’ pension benefits by permitting employers to seek waivers if they can demonstrate to Treasury that the conversion would maintain a comparable benefit formula and other protections to vested workers. Treasury must recognize the fundamental reality that if it does not mandate protections for older employees, conversions can easily lead to a reduction in promised benefits for them.
No Wearaway of Benefits: Although the proposed regulations take a half step toward prohibiting the wearaway of workers’ earned benefits (periods in which workers earn no new benefits), Treasury failed to take, but should take, a full step. The proposed regulations provide employers a choice -- either set up an opening account balance of any amount with no wearaway or provide employees with their accrued benefit with the possibility of wearaway. Banning wearaway is the least that Treasury should do in its regulations. The possibility that older employees could lose not just once by losing the benefits of a traditional final average pay formula, but then be forced to lose again by accruing no new benefits under the cash balance plan, is unconscionable.
Interest Rate Assumptions/No Whipsaw: The proposed regulations should clearly state that interest rate assumptions for purposes of calculating opening account balances, discounting annuity benefits, and any other purpose should be based on the IRC section 417(e) rate. We understand Treasury may have been reluctant to specify this rate as it is currently under debate in Congress. However, the Department's alternative proposal of “reasonable actuarial assumptions” is a step in the wrong direction. Congress has worked hard to narrow employer assumptions and provide clearer guidance on permissible assumptions, particularly interest rate assumptions. As a matter of policy, interest rate assumptions should be conservative and as uniform as possible to prevent abuse. Whipsaw is a good example. Employers should not be able to game employees’ benefits by using different interest rate assumptions in projecting and discounting future pension benefit amounts. If an employer wishes to provide more generous benefits to employees, it can do so through enhanced pay credits. However, the whipsaw problem is another example of why Treasury should put forth comprehensive cash balance regulations rather than limited age discrimination safe harbors.
Rate of Benefit Accrual Definition: Treasury takes the enormous step of determining that the rate of benefit accrual under cash balance pension plans would be treated as they are under defined contribution plans, not defined benefit plans. Treasury is treading on very weak and dangerous ground here. This is the clearest point where Treasury is stretching the limits of the law (in fact likely exceeding them) to call an apple an orange. ERISA very clearly establishes the rules for defined benefit and defined contribution plans. Nowhere does ERISA permit picking and choosing between the two categories of rules (the only cited example of the non-discrimination rules remains unclear, but still is specifically authorized by the Code). It is extremely troubling for Treasury to deviate from the defined benefit rules for this extremely critical purpose without any statutory authorization. Treasury should only make this critical exception with express Congressional authorization or in the context of comprehensive rules that fairly balance the needs of employers and promises made to employees.
Opening Account Balances: The proposed regulations do not set meaningful standards for cash balance conversion opening account balances. Balances can be set at zero, the present value of participant accrued benefits, or any arbitrary amount. Particularly, in the absence of a fair choice transition rule, the Department should require that opening account balances be set at the present value of participant accrued benefits determined as under the former defined benefit plan or the section 417(e) rate (likely with a progressive pay credit provided to older workers).
Pending Litigation: Treasury should be extremely careful not to affect or undermine any pending litigation pertaining to cash balance plans and the ADEA. The controversial nature of conversions and the significant losses experienced by employees and retirees have resulted in numerous lawsuits that are still pending. Treasury should make clear in any regulation that nothing in the regulation shall be interpreted to affect pending litigation.
Other issues: There are a host of other issues related to cash balance pension plans that Treasury and the other pension agencies, including the Pension Benefit Guaranty Corporation, need to examine such as application of the pension funding rules, PBGC related termination procedures and guaranteed benefits, spousal consent protections provided upon termination of employment and upon retirement, etc…
In addition, Treasury also should require employers to provide more detailed information to the IRS and other agencies on the terms and effects of cash balance conversions. Currently, employers do not provide clear information either to participants or the IRS on existing and cash balance pension plan formulas and how different categories of workers would be affected by the conversion. Treasury should require that employers provide full and fair information for participants and the IRS to evaluate how significant age groups would be affected by any conversion.
Because cash balance plans do not fit fully under either ERISA’s defined benefit or defined contribution plan rules and for all of the reasons cited above in this letter, Treasury and the American taxpayer would be better served by a comprehensive regulation setting standards for these plans. Before Treasury re-opens the floodgates to employer conversions at the expense of employee benefits, it should re-issue rules that embody a fair set of ground rules for conversions. If for some reason Treasury cannot do that, it should leave the conversion moratorium in place until it is so able and report to Congress.
We are sending under separate cover a request to testify orally on these comments at the Treasury Department hearings scheduled for April 9, 2003 concerning these proposed regulations.
Rep. George Miller; Rep. Bernie Sanders; Sen. Tom Harkin; Sen. Richard Durbin; Rep. Rob Andrews; Rep. Dale Kildee; Sen. Edward M. Kennedy; Sen. Barbara Boxer; Sen. Russ Feingold; Rep. Major Owens; Rep. Donald Payne; Rep. Lynn Woolsey; Rep. Rueben Hinojosa; Rep. Carolyn McCarthy; Rep. John Tierney; Rep. Rush Holt; Rep. Susan Davis; Rep. Danny K. Davis; Rep. Ed Case; Rep. Chris Van Hollen; Rep. Raul Grijalva; Rep. Denise Majette; Rep. Tim Bishop and Rep. Timothy Ryan.
Letters - Page 3