Statement of Senator Patrick Leahy On Introduction Of Pension Reduction Disclosure Act of 1999

October 07, 1999

Mr. LEAHY. Mr. President, I am pleased to join Senator Moynihan and Senator Jeffords as a cosponsor of the Pension Reduction Disclosure Act of 1999. I believe this bill is a good first step to providing American workers with the information they deserve to know about changes to their pensions. President Clinton has endorsed our legislation and is ready to sign it into law.

As the controversy surrounding IBM's decision to convert its traditional pension plan to a cash balance plan taught many Vermonters, Congress needs to revise our laws to require greater disclosure of pension changes. When IBM first announced its pension switch, many Vermont IBMers told me that they did not have enough information to judge the new plan's impact on their pensions. They discovered that current Federal law does not even require an employer to explain to its employees how any future pension benefits will be reduced. This is not right.

Unfortunately, Vermont IBMers are not alone. At least 325 companies, with more than $330 billion in pension-defined benefit assets, have adopted cash-balance plans in recent years. This phenomenon is the biggest development in the pension world in years. But, as we all know now thanks to the tireless efforts of IBMers in Vermont and elsewhere, there is a dark side to this corporate trend: the fact that many experienced workers face deep cuts in their promised pensions when their company switches to a cash-balance plan.

The Pension Reduction Disclosure Act would require all employers, regardless of the size of their pension plan, to notify their employees of pension plan changes that would reduce the future benefit accrual rate at least 45 days in advance of the change. In addition, this legislation would require employers to explain any differences in future accrual rates between the old and new plan in a clear and meaningful fashion, by providing employees with detailed examples showing the difference between the old and new plans.

This bill complements the Pension Right to Know Act, which Senator Moynihan and I introduced earlier in the year. Our earlier bill would require employers to provide employees with individualized comparisons of future benefits under the old and new plans15 days prior to the conversion for pension plans covering 1000 or more employees. Our legislation today also complements the Older Workers Pension Protection Act, S. 1600, which Senator Harkin, Senator Jeffords and I introduced last month to prevent the wear away of an employee's promised pension benefits after a cash balance plan conversion.

Now is the time for Congress to act to ensure that all employers fully disclose the negative effects of their pension plan changes. Employees have a right to know how their futures will be affected by a company's decision to change its pension plan.