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DISCUSSION DRAFT TO MODERNIZE 

MULTIEMPLOYER PENSIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH, 

EMPLOYMENT, LABOR, AND PENSIONS 

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, DC, SEPTEMBER 22, 2016 

Serial No. 114–54 

Printed for the use of the Committee on Education and the Workforce 

( 

Available via the World Wide Web: 

www.gpo.gov/fdsys/browse/committee.action?chamber=house&committee=education 

or 

Committee address: http://edworkforce.house.gov 

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(II) 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN KLINE, Minnesota, Chairman 

Joe Wilson, South Carolina 

Virginia Foxx, North Carolina 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Matt Salmon, Arizona 

Brett Guthrie, Kentucky 

Todd Rokita, Indiana 

Lou Barletta, Pennsylvania 

Joseph J. Heck, Nevada 

Luke Messer, Indiana 

Bradley Byrne, Alabama 

David Brat, Virginia 

Buddy Carter, Georgia 

Michael D. Bishop, Michigan 

Glenn Grothman, Wisconsin 

Steve Russell, Oklahoma 

Carlos Curbelo, Florida 

Elise Stefanik, New York 

Rick Allen, Georgia 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Ranking Member 

Rube ́n Hinojosa, Texas 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Joe Courtney, Connecticut 

Marcia L. Fudge, Ohio 

Jared Polis, Colorado 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Frederica S. Wilson, Florida 

Suzanne Bonamici, Oregon 

Mark Pocan, Wisconsin 

Mark Takano, California 

Hakeem S. Jeffries, New York 

Katherine M. Clark, Massachusetts 

Alma S. Adams, North Carolina 

Mark DeSaulnier, California 

Juliane Sullivan, Staff Director 

Denise Forte, Minority Staff Director 

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS 

DAVID P. ROE, Tennessee, Chairman 

Joe Wilson, South Carolina 

Virginia Foxx, North Carolina 

Tim Walberg, Michigan 

Matt Salmon, Arizona 

Brett Guthrie, Kentucky 

Lou Barletta, Pennsylvania 

Joseph J. Heck, Nevada 

Luke Messer, Indiana 

Bradley Byrne, Alabama 

Buddy Carter, Georgia 

Glenn Grothman, Wisconsin 

Rick Allen, Georgia 

Jared Polis, Colorado, 

Ranking Member 

Joe Courtney, Connecticut 

Mark Pocan, Wisconsin 

Rube ́n Hinojosa, Texas 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Frederica S. Wilson, Florida 

Suzanne Bonamici, Oregon 

Mark Takano, California 

Hakeem S. Jeffries, New York 

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(III) 

C O N T E N T S 

Page 

Hearing held on September 22, 2016 ..................................................................... 1 

Statement of Members: 

Polis, Hon. Jared, Ranking Member, Subcommittee on Health, Employment, Labor, and Pensions ........................................................................... 4 

Prepared statement of ............................................................................... 5 

Roe, Hon. David P., Chairman, Subcommittee on Health, Employment, 

Labor, and Pensions ..................................................................................... 1 

Prepared statement of ............................................................................... 3 

Statement of Witnesses: 

DeFrehn, Mr. Randy, Executive Director, National Coordinating Committee for Multiemployer Plans, Washington, D.C. ................................... 30 

Prepared statement of ............................................................................... 33 

Terven, Mr. Rick, Executive Vice President, United Association of Journeymen and Apprentices of the Plumbing NDA Pipe Fitting Industry, 

Annapolis, MD ............................................................................................... 41 

Prepared statement of ............................................................................... 44 

Certner, Mr. David, Legislative Counsel and Legislative Policy Director, 

AARP Government Affairs, Washington, D.C. ........................................... 47 

Prepared statement of ............................................................................... 49 

Green, Mr. Jeff, Principal, Harris Davis Reber LLC, Bellevue, NE ............ 55 

Prepared statement of ............................................................................... 57 

Additional Submissions: 

Bonamici, Hon. Suzanne, a Representative in Congress from the State 

of Oregon: 

Composite Plan Legislation Immediately Reduces Legacy Plan Funding and Diverts that Money to the Composite Plan ........................... 80 

Prepared statement of the Western Conference of Teamsters Pension 

Plan ......................................................................................................... 102 

Mr. DeFrehn: 

Composite & Legacy Plan Comparative Stress Testing ......................... 68 

Mr. Polis: 

Prepared statement of the International Association of Machinists 

and Aerospace Workers, the International Brotherhood of Boilermakers, the International Brotherhood of Teamsters, the National 

Retirees Legislative Network, the Pension Rights Center, and 

United Steelworkers Opposing Consideration of ‘‘Composite’’ Pension Legislation ...................................................................................... 99 

Chairman Roe: 

Letter dated September 9, 2016, from Association of Union Constructors .......................................................................................................... 9 

Letter dated September 9, 2016, from the Broadway League ............... 11 

Letter dated September 9, 2016, from National Electrical Contractors 

Association (NECA) ............................................................................... 16 

Letter dated September 9, 2016, from Chamber of Commerce of the 

United States of America ...................................................................... 26 

Letter dated September 12, 2016, from Associated Wholesale Grocers, 

Inc., Bimbo Bakeries USA, Dean Foods, Penske Truck Leasing 

Co., L.P., Prairie Farms Dairy, Spangler Candy Company, 

SUPERVALU, and the Kroger Co. ....................................................... 13 

Letter dated September 16, 2016, from United Brotherhood of Carpenters and Joiners of America ............................................................ 25 

Letter dated September 21, 2016, from International Union of Operating Engineers ...................................................................................... 14 

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IV 

Additional Submissions—Continued 

Chairman Roe—Continued 

Letter dated September 22, 2016, from Associated General Contractors of America (AGC) ........................................................................... 8 

Letter dated September 22, 2016, from National Electrical Contractors Association (NECA) ........................................................................ 18 

Letter dated September 22, 2016, from North America’s Building 

Trades Unions ........................................................................................ 20 

Letter dated September 22, 2016, from Sheet Metal and Air Conditioning Contractors’ National Association ........................................... 22 

Letter dated September 23, 2016, from International Council of Employers (ICE) .......................................................................................... 28 

Prepared statement of from the United Association of Journeymen 

and Apprentices of the Plumbing and Pipefitting Industry (UA) 

and the Mechanical Contractors Association of America (MCAA) .... 24 

New Composite Retirement Plan Concept will Strengthen Retirement 

Benefits for Workers by Making Multiemployer Plans Sustainable . 27 

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(1) 

DISCUSSION DRAFT TO MODERNIZE 

MULTIEMPLOYER PENSIONS 

Thursday, September 22, 2016 

U.S. House of Representatives, 

Subcommittee on 

Health, Employment, Labor, and Pensions, 

Committee on Education and the Workforce, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 9:34 a.m., in Room 

2175, Rayburn House Office Building, Hon. David P. Roe [chairman 

of the subcommittee] presiding. 

Present: Representatives Roe, Foxx, Walberg, Guthrie, Heck, 

Messer, Carter, Grothman, Allen, Polis, Courtney, Pocan, Hinojosa, 

Wilson, Bonamici, Takano, and Jeffries. 

Also Present: Representatives Kline and Scott. 

Staff Present: Bethany Aronhalt, Press Secretary; Andrew 

Banducci, Workforce Policy Counsel; Janelle Gardner, Coalitions 

and Members Services Coordinator; Ed Gilroy, Director of Workforce Policy; Jessica Goodman, Legislative Assistant; Callie Harman, Legislative Assistant; Nancy Locke, Chief Clerk; Dominique 

McKay, Deputy Press Secretary; Michelle Neblett, Professional 

Staff Member; Brian Newell, Communications Director; Krisann 

Pearce, General Counsel; Alissa Strawcutter, Deputy Clerk; Juliane 

Sullivan, Staff Director; Olivia Voslow, Staff Assistant; Joseph 

Wheeler, Professional Staff Member; Tylease Alli, Minority Clerk/ 

Intern and Fellow Coordinator; Jamitress Bowden, Minority Press 

Assistant; Denise Forte, Minority Staff Director; Nicole Fries, Minority Labor Policy Associate; Christine Godinez, Minority Staff Assistant; Brian Kennedy, Minority General Counsel; Kevin 

McDermott, Minority Senior Labor Policy Advisor, Richard Miller, 

Minority Senior Labor Policy Advisor; and Elizabeth Watson, Minority Director of Labor Policy. 

Chairman ROE. A quorum being present the Subcommittee on 

Health, Employment, Labor, and Pensions will come to order. Good 

morning. I’d like to begin by welcoming our guests and witnesses, 

and thank you all for joining us. 

We’re here to discuss an issue that is vitally important to Americans from all walks of life, retirement security. This is a leading 

priority for millions of hardworking men and women, and that’s 

why it’s a leading priority for Republicans and Democrats alike. 

Strengthening retirement security has always been a difficult chalCEWDOCROOM with DISTILLER

2 

lenge with no easy answers. It’s one that demands thoughtful dialogue, bipartisan cooperation, and meaningful reforms. That’s exactly what our committee has been engaged in for several years 

now. 

Since 2012, the committee has focused on examining and advancing bipartisan reforms to the multiemployer pension system. Over 

10 million Americans rely on the multiemployer pension plan. Unfortunately, many of the plans are severely underfunded due to an 

aging population, a weak economy, and fewer participating employers. To make matters worse, the Federal agency ensuring those 

plans, the Pension Benefit Guaranty Corporation, or PBGC, is also 

headed for insolvency; as a result, workers, retirees, businesses, 

and taxpayers are at risk. 

Fortunately, Congress has already taken action to help address 

this crisis. With the support of employers and labor leaders, Congress passed and President Obama signed into law important reforms to improve PBGC’s long-term stability, provide trustees with 

the tools they need to rescue failing plans and prevent retirees 

from losing everything. These reforms represent significant 

progress, and there’s more work to be done. 

Our focus now turns toward modernizing the employer pension 

system for today’s workers and tomorrow’s retirees. A lot has 

changed since the multiemployer pensions were developed decades 

ago. As union leaders, employers, and retired and taxpayer advocates have expressed for years, it’s long past time to bring this system into the 21st century. 

So what does a modern multiemployer pension system look like? 

I hope we can dive deeper into this important question today. 

Before we begin, I’d like to explain a few guiding principles. First 

and foremost, our goal is to strengthen retirement security. America’s workers deserve better than retirement plans based on empty 

promises and designed for yesterday’s workforce. In the 21st century, workers should have more retirement plan options to meet 

their needs. While we take steps to modernize the system for the 

future, we must also protect workers and retirees in traditional 

multiemployer pension plans. We will continue to do everything 

possible to ensure those who have spent their lifetimes working 

hard and providing for their families can spend their retirement 

years with security and peace of mind. That means employers, even 

those who transition to modern retirement plans, should be required to sufficiently fund existing multiemployer pension commitments. 

Second, a modern multiemployer pension system will improve 

the competitiveness of America’s businesses. In the 21st century, 

employers shouldn’t have to choose between growing their businesses or offering their employees a secure and stable benefit. More 

flexibility through alternative options will empower employers to 

expand their businesses and create good paying jobs, all the while 

contributing toward their employees’ retirement. 

Finally, we need to deliver greater protection for taxpayers. Unlike traditional defined benefit plans, these new multiemployer 

pension plans should not be covered by the PBGC. The last thing 

we need to do is to add more financial strain to an agency projected 

CEWDOCROOM with DISTILLER

3 

to go bankrupt in less than 10 years. The last thing taxpayers need 

is to foot the bill for a multibillion-dollar bailout. 

These are the overarching principles behind the discussion draft 

Chairman Kline recently released. His proposal would provide 

workers and employers a new retirement plan known as composite 

plans, which combine the flexibility of 401(k)-style defined contribution plans with the lifetime income provided by defined benefit 

pension plans. The draft proposal reflects input from employers, 

labor leaders, retirees, and taxpayer advocates. Still, we need more 

feedback. And as its title suggests, this is a draft meant to spur 

a conversation. So we want to hear from all of you all and from the 

broader public. How can we make this proposal best serve the interests of workers and employers. 

We also welcome your views and ideas on reforms to improve the 

PBGC’s fiscal health. Although we took steps to address PBGC 

shortfalls in 2014, more work is desperately needed, including further premium increases. The stakes couldn’t be higher. People’s retirement benefits, their livelihoods, their futures are in jeopardy, 

and kicking the can down the road will only make the problem 

worse and unfairly threaten taxpayers with a bill they can’t afford. 

We don’t always agree on everything, but I appreciate the bipartisan work this committee has done over the years to strengthen 

retirement security and tackle the challenges facing the multiemployer pension system. I hope we can continue what we started by 

advancing further reforms and modernizing the system for today’s 

workers and future generations. 

We have a lot of ground to cover, so with that I will yield to the 

Ranking Member Polis for his opening remarks. 

[The statement of Chairman Roe follows:] 

Prepared Statement of Hon. David P. Roe, Chairman, Subcommittee on 

Health, Employment, Labor, and Pensions 

We are here to discuss an issue that is vitally important to Americans from all 

walks of life: retirement security. This is a leading priority for millions of hardworking men and women, and that is why it’s a leading priority for Republicans and 

Democrats alike. 

Strengthening retirement security has always been a difficult challenge with no 

easy answers. It’s one that demands thoughtful dialogue, bipartisan cooperation, 

and meaningful reforms. That’s exactly what our committee has been engaged in for 

several years now. 

Since 2012, the committee has focused on examining and advancing bipartisan reforms to the multiemployer pension system. Over 10 million Americans rely on multiemployer pension plans. Unfortunately, many plans are severely underfunded due 

to an aging population, a weak economy, and fewer participating employers. To 

make matters worse, the federal agency insuring those plans—the Pension Benefit 

Guaranty Corporation or PBGC—is also headed for insolvency. As a result, workers, 

retirees, businesses, and taxpayers are at risk. 

Fortunately, Congress has already taken action to help address this crisis. With 

the support of employers and labor leaders, Congress passed and President Obama 

signed into law important reforms to improve PBGC’s long-term stability, provide 

trustees with the tools they need to rescue failing plans, and prevent retirees from 

losing everything. These reforms represent significant progress, but there’s more 

work to be done. 

Our focus now turns toward modernizing the multiemployer pension system for 

today’s workers and tomorrow’s retirees. A lot has changed since multiemployer 

pensions were developed decades ago. As union leaders, employers, and retiree and 

taxpayer advocates have expressed for years—it’s long past time to bring the system 

into the 21st century. 

CEWDOCROOM with DISTILLER

4 

So, what does a modern multiemployer pension system look like? I hope we can 

dive deeper into this important question today. Before we begin, I’d like to explain 

a few guiding principles. 

First and foremost, our goal is to strengthen retirement security. America’s workers deserve better than retirement plans based on empty promises and designed for 

yesterday’s workforce. In the 21st century, workers should have more retirement 

plan options that meet their needs. 

While we take steps to modernize the system for the future, we must also protect 

workers and retirees in traditional multiemployer pension plans. We will continue 

to do everything possible to ensure those who have spent their lifetimes working 

hard and providing for their families can spend their retirement years with security 

and peace of mind. That means employers—even those who transition to modern retirement plans—should be required to sufficiently fund existing multiemployer pension commitments. 

Second, a modern multiemployer pension system will improve the competitiveness 

of America’s businesses. In the 21st century, employers shouldn’t have to choose between growing their businesses or offering their employees secure and stable benefits. More flexibility through alternative plan options will empower employers to expand their businesses and create good-paying jobs—all while contributing toward 

their employees’ retirement. 

Finally, we need to deliver greater protection for taxpayers. Unlike traditional defined benefit plans, these new multiemployer pension plans should not be covered 

by the PBGC. The last thing we need to do is to add more financial strain on an 

agency projected to go bankrupt in less than 10 years. And the last thing taxpayers 

need is to foot the bill for a multi-billion dollar bailout. 

These are the overarching principles behind the discussion draft Chairman Kline 

recently released. His proposal would provide workers and employers a new retirement plan option known as ‘‘composite plans,’’ which combine the flexibility of 

401(k)-style defined contribution plans with the lifetime income provided by defined 

benefit pension plans. 

The draft proposal reflects input from employers, labor leaders, and retiree and 

taxpayer advocates. Still, we need more feedback. As its title suggests, this is a 

draft meant to spur a conversation. So, we want to hear from all of you and the 

broader public. How can we make this proposal best serve the interests of workers 

and employers? 

We also welcome your views and ideas on reforms to improve PBGC’s fiscal 

health. Although we took steps to address PBGC’s shortfalls in 2014, more work is 

desperately needed, including further premium increases. The stakes couldn’t be 

higher: people’s retirement benefits—their livelihoods, their futures—are in jeopardy, and kicking the can down the road will only make the problem worse and unfairly threaten taxpayers with a bill they can’t afford. 

We don’t always agree on everything. But I appreciate the bipartisan work this 

committee has done over the years to strengthen retirement security and tackle the 

challenges facing the multiemployer pension system. I hope we can continue what 

we started by advancing further reforms and modernizing the system for today’s 

workers and future generations. 

Mr. POLIS. Good morning. I want to thank Chairman Roe for arranging this hearing and for his and Chairman Kline’s continued 

efforts on behalf of multiemployer pensions and those who’ve 

worked hard. I appreciate their willingness to work through this 

hearing in a fair, open, and bipartisan way. And I thank our witnesses for joining us today. 

I hope we can all agree that everyone who works hard and plays 

by the rules deserves to live out their golden years with the dignity 

that they’ve earned. Retirement security affects not only the retiring populations, but also younger generations who are caring for 

their aging parents. 

Last April, the Subcommittee held a hearing on multiemployer 

pensions to explore new plan designs. Specifically several innovative legislative concepts like variable annuity plans and composite 

plans were discussed and presented as options that could help 

strengthen the multiemployer pension system and provide flexiCEWDOCROOM with DISTILLER

5 

bility for employers and maintain appropriate benefits and protections for workers and retirees. Today’s hearing is in many ways in 

that same vein; it is a continuation of our committee’s important 

work in this area. 

Chairman Kline put forward a discussion draft establishing composite plans, and these plans resemble traditional defined benefit 

pension plans in that assets will be pooled and professionally managed and participants’ benefits would be paid out in the form of an 

annuity that they could not outlive. These composite plans also 

blend aspects of a 401(k)-style defined contribution plan, as employers would not incur the risks, costs, and liabilities associated 

with the defined benefit pension system. 

So a diverse collection of groups, including representatives of 

both business and organized labor, have already come forward and 

expressed support for Chairman Kline’s discussion draft. It’s rare 

to see the Chamber of Commerce and the National Building Trades 

Union seeing eye-to-eye on the same issue, but they do on this one; 

but, of course, that agreement is certainly not unanimous. Several 

respected organizations that represent beneficiaries and retirees 

and administer plans have registered concern or opposition to composite plans as well. They expressed their fears to me that the composite plan concept could allow employers to transition to a new 

plan and escape their obligation to appropriately fund the existing, 

or legacy, plan. They also raised legitimate questions about whether composite plans include sufficient protections for workers and 

retirees. 

So I know we’ll be exploring a lot of those themes and questions 

today that many of our members have. That’s why a fair and transparent process for considering this discussion draft is so important. 

This subcommittee hearing gives members the opportunity to learn 

more about composite plans and ask questions about Chairman 

Kline’s discussion draft. I know Chairman Kline and his staff are 

also soliciting public and stakeholder feedback on the draft as well 

and have already incorporated at least two rounds of that into the 

current draft. 

This legislation would make major changes to our multiemployer 

retirement system. That’s why today’s discussion is so important. 

This sort of change requires careful consideration and thoughtful 

debate among stakeholders and policymakers. The process of adopting sweeping changes to defined benefit retirement plans should be 

an open, transparent, fair, and most of all, thorough process. 

After today’s hearing, I hope the Committee is able to fully consider the witnesses’ testimony and thoughtfully consider their recommendations to improve the discussion draft. Once the bill is introduced, I hope it can go through regular order, which would allow 

our committee to engage in a markup, where members on both 

sides of the aisle could offer amendments to improve the final bill. 

There are currently about 1,400 multiemployer pension plans 

covering approximately 10 million Americans. Many of these plans 

are facing dire financial circumstances. If we’re going to move forward on this composite plan discussion draft, it’s very important 

that we get it right, but, Mr. Chairman, we shouldn’t stop there. 

Another pensions-related priority demands Congress’s immediate 

attention. As you know, tens of thousands of coal miners, including 

CEWDOCROOM with DISTILLER

6 

over 500 in my home State of Colorado, are at risk of losing 

healthcare and pension benefits. Unless Congress acts, about 

20,000 retirees stand to lose their promised health benefits by the 

end of this year, hence the urgency. 

Pension promises were made to these miners and their families, 

and these promises need to be kept. I’m a cosponsor of bipartisan 

legislation that would solve this problem and avoid a catastrophic 

scenario for hardworking miners and their families in my State 

and across the country, and I would encourage Congress before this 

year ends to pass that bill. 

Again, I want to thank Chairman Roe for convening this hearing. 

I look forward to the witnesses’ testimony. And I yield back the 

balance of my time. 

[The statement of Mr. Polis follows:] 

Prepared Statement of Hon. Jared Polis, Subcommittee on Health, 

Employment, Labor, and Pensions 

Good morning. I want to thank Dr. Roe for arranging this hearing and for his and 

Chairman Kline’s continued interest in multiemployer pension reform. I appreciate 

their willingness to work in a fair, open, and bipartisan way on this critical issue. 

We can all agree that everyone who works hard and plays by the rules deserves 

to live out their golden years with dignity. Retirement security affects not only the 

retiring population, but younger generations who are caring for their aging parents. 

Last April, the Subcommittee held a hearing on multiemployer pensions to explore what we called ‘‘new plan designs.’’ Specifically, several innovative legislative 

concepts – such as variable annuity plans and composite plans – were discussed as 

options to strengthen the multiemployer pension system, provide flexibility for employers, and maintain appropriate benefits and protections for workers and retirees. 

Today’s hearing represents a continuation of this important work. 

Chairman Kline put forward discussion draft legislation establishing composite 

plans. These plans resemble a traditional defined-benefit pension plan in that assets 

would be pooled and professionally managed, and participants’ benefits would be 

paid out in the form of an annuity that they could not outlive. These composite 

plans also blend aspects of a 401(k) style defined contribution plan, as employers 

would not incur the risks, costs, and liabilities associated with the defined-benefit 

pension system. 

A diverse collection of groups – including those representing business and organized labor – have already come forward and expressed their support for Chairman 

Kline’s discussion draft. And I truly mean diverse. It’s not often you see the U.S. 

Chamber of Commerce and the National Building Trades Unions see eye to eye on 

the same issue, but on this one they do. 

But by no means is this unanimous. 

Several respected organizations have registered concern or opposition to composite 

plans. They fear that the composite plan concept will allow employers to transition 

to a new plan and escape their obligation to appropriately fund the existing – or 

legacy – plan. They also raise legitimate questions about whether composite plans 

include sufficient protections for workers and retirees. We have to take this point 

of view seriously. 

That’s why we must have a fair and transparent process for considering this discussion draft. This Subcommittee hearing gives Members the opportunity to learn 

more about composite plans and ask questions about Chairman Kline’s discussion 

draft. I know that Chairman Kline and his staff are also soliciting public and stakeholder feedback on the draft as well – which is also incredibly important. 

This legislation would make major changes to our multiemployer retirement system. This sort of change requires careful consideration and thoughtful debate among 

all stakeholders. The process of adopting such sweeping changes to defined benefit 

retirement plans should be open, transparent, fair, and most of all thorough. After 

today’s hearing, I hope that the Committee is able to fully consider the witnesses’ 

testimony and thoughtfully consider their recommendations to improve the discussion draft. Once a bill is introduced, I hope that it can go through regular order, 

which would include a full committee mark-up where Members can offer amendments and improve the final bill. 

There are currently about 1,400 multiemployer pension plans, covering approximately 10 million Americans. Many of these plans are facing dire financial cirCEWDOCROOM with DISTILLER

7 

cumstances. If we are going to move forward on this composite plan discussion draft 

–then it’s important we get it right. 

But, Mr. Chairman, we shouldn’t stop here. Another pensions-related priority demands Congress’s immediate attention. 

Tens of thousands of coal miners – including over 500 in Colorado – are at risk 

of losing health care and pension benefits. Unless Congress acts, about 20,000 retirees stand to lose their promised health benefits by the end of this year. Pension 

promises were made to these miners and their families, and these promises need 

to be kept. 

I am a co-sponsor of bipartisan legislation that would solve this problem and 

avoid a catastrophic scenario for hard-working miners and their families in my state 

and across the country. Before Congress adjourns this year, we must pass this bill. 

Again, I want to thank Dr. Roe for convening this hearing and look forward to 

the witnesses’ testimony. I yield back the balance of my time. 

Chairman ROE. I thank the gentleman for yielding. 

Pursuant to Committee Rule 7(c), all subcommittee members will 

be permitted to submit written statements to be included in the 

permanent hearing record. And without objection, the hearing 

record will remain open for 14 days to allow statements, questions 

for the record, and other extraneous material referenced during the 

hearing to be submitted in the official hearing record. 

Before I recognize our witnesses, I would like to submit for the 

record statements and letters from employers and labor leaders 

who support the effort to provide a new option for workers to save 

for retirement through the creation of composite plans, including 

statements and letters from the Associated General Contractors of 

America, The Association of Union Constructors, the Broadway 

League, Dean Foods, International Union of Operating Engineers, 

the Kroeger Company, Mechanical Contractors Association of 

America, the National Electrical Contractors Association, North 

America’s Building Trades Unions, Sheet Metal and Air Conditioning Contractors National Association, Super Value, United Association of Journeymen and Apprentices of the Plumbing and 

Pipefitting Industry, United Brotherhood of Carpenters and Joiners 

of America, and the U.S. Chamber of Commerce. 

And I ask unanimous consent that these be submitted for the 

record. And without objection, so ordered. 

[The information follows:] 

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Chairman ROE. I want to take a point of personal privilege. I 

don’t know whether we will have another subcommittee hearing or 

a chance to do this, but I would like to thank my friend Ruben 

Hinojosa. I’ve been here now four terms, and Mr. Hinojosa from 

Texas and I have co-chaired the Adult Literacy Caucus together 

and have a real passion for adult literacy. He has been a true— 

a good friend and a true privilege to work with you. And, Ruben, 

I wish you nothing but the best. And thank you for the service, 

your service to our great country. 

Mr. HINOJOSA. Thanks. 

Chairman ROE. It’s now my pleasure to introduce our distinguished panel of witnesses. Randy DeFrehn, well known here, is 

the executive director of the National Coordinating Committee for 

Multiemployer Pension Plans, NCCMP. Mr. DeFrehn has extensive 

experience working with multiemployer plans as a plan administrator, actuarial and benefits consultant, a registered investment 

adviser, and now with the NCCMP. He has served a 3-year term 

as a member of the Department of Labor’s ERISA Advisory Council 

from 2007 until 2009. Welcome, Randy. 

Rick Terven is the executive vice-president of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, or UA. The UA represents approximately 340,000 

plumbers, pipefitters, sprinkler fitters, service technicians, and 

welders in local unions across America. Welcome. 

David Certner is the legislative counsel and director of legislative 

policy with government affairs at AARP. He serves as counsel for 

AARP’s legislative, regulatory, litigation, and policy efforts. Mr. 

Certner has also previously served as chairman of the ERISA Advisory Council for the Department of Labor. Welcome. 

Jeff Green is a principal of Harris Davis Reber, LLP. Mr. Green 

has experience as president and owner of several midwestern structural steel precast erection, rebar placing, and crane service companies. He serves as a trustee for several multiemployer funds. And 

welcome. 

Now I’ll ask the witnesses to raise your right hand. 

[Witnesses sworn.] 

Chairman ROE. Let the record reflect the witnesses answered in 

the affirmative. Thank you. 

Before I recognize you to provide your testimony, let me briefly 

explain the lighting system. You have five minutes to present your 

testimony. When you begin, the light in front of you will turn 

green; when one minute is left, the light will turn yellow; when 

your time has expired, the light will turn red. At that point, I will 

ask you to wrap up your remarks as best as possible. 

Members will each have five minutes. And I won’t cut you off in 

the middle of a sentence, but do try to wrap up when it turns red. 

Mr. DeFrehn, you’re recognized for five minutes. 

TESTIMONY OF RANDY DEFREHN, EXECUTIVE DIRECTOR, NATIONAL COORDINATING COMMITTEE FOR MULTIEMPLOYER 

PLANS, WASHINGTON, D.C. 

Mr. DEFREHN. Thank you, Chairman Roe. 

Chairman Roe, Ranking Member Polis, and members of the committee, I want to thank you for the honor of being able to appear 

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before you again today on this important topic. My written testimony is more extensive than what I’ll be talking to you about 

today, but I’ve selected some items that I think need special emphasis and perhaps can just start the discussion for the questions 

to follow. 

The composite plan, as you heard, is neither a defined benefit 

nor defined contribution plan under the current law, as the variable nature of the benefits is neither definitely determinable, nor 

is it based on an individual account; rather, it is intended to bring 

together the best features of each. When the bargaining parties voluntarily determine that such a structure is preferable for a specific 

population, it would be made available to jointly-managed multiemployer plans as a successor to their current defined benefit plan. 

The model includes very clear conditions for the parties to pay off 

the liabilities of a legacy defined benefit plan as the first priority 

for contributions. 

The discussion draft, which is several generations from the original proposal that was contained in the earliest draft of MPRA has 

benefited from the opportunity to more closely examine and stress 

test various proposals contained in this legislation. It has also been 

strengthened by a thorough review of concerns expressed by others, 

some of whom had participated in the proposal’s original draft, and 

some expressed by the administration. 

As the overall objective was to create innovative plan designs, 

the input by others has been welcome and beneficial to the overall 

end product. Such suggestions include proposals to limit plans that 

can elect to become composite plans by placing a statutory prohibition on critical status plans or those that can elect critical status. 

It also strengthens the funding of legacy plans by requiring that 

contributions to fund future accruals be subject to a higher funding 

standard than are required for the current defined benefit plans. 

The discussion draft now requires contributions at the greater of 

the plan’s required funding levels under the Pension Protection Act 

or something called the transition minimum contribution. It also 

strengthens the legacy plans by reducing the amortization period 

for existing liabilities over 25 years rather than over 30. At that 

level, plans which are permitted to adopt the composite components 

will still be able to offer benefit accruals at levels sufficient to retain the support of active workers, you’ll hear some of those remarks by other witnesses, but it’s critical that active workers continue to support these plans in order to allow them to fund all of 

their obligations. 

Many of the actives are currently paying multiples of the contribution rates of the people who went before them, but receive 

only a fraction of the benefit accruals that were in effect for the 

earlier retirees. 

Other changes to improve the discussion draft include elimination of trustee discretion in determining the amount of contributions payable to the legacy and composite plans, and requiring new 

employers who contribute to the plan to also contribute to legacy 

plans, which will help pay off these liabilities faster. If the parties 

so desire, benefit plan could mirror the current plan design for the 

defined benefit plan. It could also continue some of the more favorable features of those plans. 

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The new structure is clearly not a defined benefit plan, however, 

as benefits are variable based on the value of market—market 

value of assets, as currently happens with any defined contribution 

plan. Again, these are a combination of both features here. The 

amount one would receive would be adjusted on an annual basis 

determined using a 15-year projection at the plan’s assumed rate 

of return to mitigate the frequency and impact of market fluctuations. Contributions to both plans would be determined by the 

plan’s actuary. As the investment—as the market risk for future 

service rests with the participant, however, the minimum contribution requirement to fund the cost of future accruals would be set 

at 120 percent of the actuary’s projected costs to provide a market—a buffer against market volatility. 

For plans that are making a complete conversion to the new 

model, a fresh start may be elected, which would allow the plan to 

amortize existing liabilities over a 25-year period. Stress testing of 

this approach shows that in almost all cases, this would be sufficient to retain the current benefit accrual under the defined benefit 

plan as the target accrual funded at the 120 percent without increasing contributions. Such a fresh start does not excuse full funding of any of the accrued liabilities, but simply extends the period 

over which such liabilities would be funded. 

As this is not a defined benefit plan, service earned after adoption would not be subject to the PBGC guarantee, nor would employers be subject to withdrawal liability. As Chairman Roe has indicated, although there have been suggestions that the PBGC insure a portion of this benefit, these are not included in the discussion draft, and we believe that was the correct option. Chairman, 

may I—maybe for one extra minute. 

The question of PBGC and their current deficit is something that 

we have struggled with as a community for some time. We have 

examined it, we looked at the administration’s proposal, and contrary to their proposal, the structure of their proposal, we believe 

that it rather than strengthen PBGC, it would do exactly the opposite by driving employers out of the system. It’s the view of the reconvened Retirement Security Review Commission that came up 

with these original proposals that the agency—the entire system 

for the PBGC should be carefully reexamined and a variety of alternatives examined. 

From the types of—the way the premiums are structured, whether they be based on the benefits themselves that are guaranteed or 

the wage rates of the people covered, whether or not the guaranty 

itself should be adjusted upward or downward, but lastly, we believe that there is—there are some—there are some alternatives 

that would mitigate the current projected deficit of the $52 billion, 

perhaps by half, by examining and changing some of the rules that 

apply to single employer plans and making them available to the 

PBGC for multiemployer plans. 

With that, I’d close my comments, and I thank you for the opportunity to be here, and welcome your questions. 

[The statement of Mr. DeFrehn follows:] 

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Chairman ROE. Thanks very much. 

Mr. Terven, you’re recognized for five minutes. 

TESTIMONY OF RICK TERVEN, EXECUTIVE VICE PRESIDENT, 

UNITED ASSOCIATION OF JOURNEYMEN AND APPRENTICES 

OF THE PLUMBING NDA PIPE FITTING INDUSTRY, ANNAPOLIS, MARYLAND 

Mr. TERVEN. Thank you, Chairman. 

Chairman Roe, Ranking Member Polis, and members of the committee, it is an honor to appear before you today. My name is Rick 

Terven, and I am the executive vice-president of the United Association of Plumbers and Pipefitters. 

The UA strongly supports composite plans as proposed in the discussion draft. We view composite plans not as an alternative to defined benefit plans, but as an alternative to the inadequate defined 

contribution plans that we see sometimes replacing existing defined benefit plans. The UA also believes that the provisions of the 

discussion draft that support the funding of the legacy defined benefit plans will preserve some of these plans that may otherwise fail 

due to an eroding contribution base. 

Multiemployer defined benefit plans exist in industries characterized by frequent short-term employment. Our defined benefit 

plans have enabled skilled workers to earn a pension that provides 

lifetime income. These plans have provided essential safeguards for 

the financial security of construction workers, and have been the 

primary form of retirement benefit in the construction industry. 

While defined contribution plans have replaced defined benefit 

plans in many industries, in construction, defined contribution 

plans generally remain supplemental to defined benefit plans. 

Many multiemployer defined benefit plans suffered significant investment losses in economic downturns in the last decade and suffered further losses from reduced contribution strains, because 

work on which employer contributions were required remained depressed for years following the 2008 crash. 

Employer bankruptcies, in which obligations to plans have been 

discharged, have further attacked the funding of defined benefit 

plans. Some plans that were once solidly funded found themselves 

in critical or endangered status under the Pension Protection Act. 

Unions and employers have worked together to stabilize these 

plans, but even the plans that are recovering financially are not as 

secure as they once were. 

In 2010, the Financial Accounting Standards Board proposed 

changes in corporate financial statements that have required an 

employer to make disclosures about potential withdrawal liability. 

Although disclosures were ultimately limited, the publicity surrounding this proposal made lending institutions aware that employers potentially faced withdrawal liability. As a result, employers have advised they now find it very difficult to obtain credit 

even if they have no intention of withdrawing from a multiemployer defined benefit plan. Employers cannot operate without access to credit. And threatened with losing their companies, employers have used various methods to leave plans. Employers will negotiate and pay withdrawal liability once their plan becomes relatively well funded rather than face the continued uncertainty. 

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Even if they make their required contribution, forces beyond their 

control could result in substantial withdrawal liability. 

New employers are advised they—have advised they will not 

enter a defined benefit plan for fear of this withdrawal liability. As 

employers leave a multiemployer defined benefit plan and no new 

employers replace them, the contribution base for the plan is severely undermined. Employers and employees see little advantage 

to continuing in this plan. The UA believes that it is essential to 

the retirement security of our members to offer plans that provide 

lifetime income. In our experience, this security cannot be achieved 

through current defined contribution plans. The intermittent nature of our work, the access to retirement funds and defined contribution plans, self-directed investments, and the immediate impact of market changes all limit the growth of account balances. 

The proposed reforms in the discussion draft issued by Chairman 

Kline offer this new composite plan design that we feel will preserve the lifetime income feature of the defined benefit plan but 

will not drive contributing employers out of the system because of 

the very threat of withdrawal liability. Eroding an employer’s support is significantly harming defined benefit plans and is certainly 

one of the reasons for plan insolvency. And as long as the threat 

of withdrawal liability exists, the pull of employers contributing to 

multiemployer defined benefit plans will not increase sufficiently to 

support the system. There will be a growing trend toward defined 

contribution plans, which typically cannot ensure that desired income security to workers in the mobile industries that rely on multiemployer plans. 

It is our goal to help formulate creative and realistic solutions to 

the challenges facing our multiemployer defined benefit plans that 

balance the interests of all the plan’s stakeholders, and we believe 

the composite plan proposed by Chairman Kline is a critical piece 

of such a solution for reasons that include the following: we believe 

the composite plan proposed by Chairman Kline—exhibit me. 

Chairman Kline’s plan, composite plan will provide lifetime retirement income based on pool longevity, similar to defined benefit 

plans. In contrast, workers who must solely rely on defined contribution plans face the real possibility of outliving their retirement 

savings or losing their savings through poor investment decisions. 

Composite plans are not intended to replace— 

Mr. Chairman, could I get an extra minute to finish this? 

Chairman ROE. Sure. 

Mr. TERVEN. Thank you. 

Composite plans are not intended to replace defined benefit 

plans, but are intended to be an alternative to the 401(k) defined 

contribution plan that are increasingly proposed when an employer 

refuses to participate in a defined benefit plan. 

Composite plans have features of both defined benefit and defined contribution plans. Composite plans provide for the accumulation of benefits and a lifetime benefit in a manner similar to defined benefit plans. In times of economic distress, composite plans 

benefits may be reduced like a defined contribution plan, but the 

reduction is not immediate and the advanced funding provisions 

are sufficient to protect participants. 

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Furthermore, our Canadian members have plans subject to similar provisions, and those plans have run very well over the years, 

providing lifetime benefits to our Canadian members. The proposal 

includes provisions to protect and support the continued funding of 

the legacy defined benefit plan, and this serves to protect the current provisions benefits by participants and retirees. These composite plans do not threaten the future of the funding of the PBGC, 

and by preserving the funding of legacy defined benefit plans by 

employers that would otherwise leave those plans, the composite 

plan proposal helps to ensure that those legacy plans will continue 

as long-term premium payers. 

The composite plan discussion provides an additional option to 

secure lifetime retirement income and our employees where support for defined benefit plans continue to erode. If composite plans 

are not made available, we believe that many existing defined benefit plans will eventually be replaced with defined contribution 

plans or no plan. The opportunity for creative solutions to our retirement income challenge is within our grasp. We strongly encourage Congress to expand available plan offerings to enable labor and 

management to find solutions which best meet their specific needs. 

I once again thank you for your work to improve the retirement 

security for our members and for the rest of the 10.4 million participants in multiemployer plans. Thank you, sir. 

[The statement of Mr. Terven follows:] 

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Chairman ROE. Thank you, Mr. Terven. 

Mr. Certner, you’re recognized for five minutes. 

TESTIMONY OF DAVID CERTNER, LEGISLATIVE COUNSEL AND 

LEGISLATIVE POLICY DIRECTOR, AARP GOVERNMENT AFFAIRS, WASHINGTON, D.C. 

Mr. CERTNER. Thank you, Mr. Chairman. My name is David 

Certner, and I am legislative counsel and policy director for AARP. 

And on behalf of our 38 million members, we thank you and Chairman Polis for the opportunity to testify today. 

The multiemployer pension system, covering about 10 million 

workers and retirees, faces a number of complex challenges, and we 

appreciate the efforts of many to address these issues. 

AARP is particularly concerned with protecting those in or near 

retirement. We therefore urge that any legislation focus first and 

foremost on protecting the earned pensions that millions of retirees 

and near retirees count on for their retirement security. In addition, any legislation should address the funding problems faced by 

both the plans and the PBGC. And, finally, while AARP is open to 

new plan designs, any new plan should be part of a comprehensive 

solution that ensures existing promises are kept and new ones are 

fair and adequate. 

The multiemployer system has been important to our nation’s 

pension framework. However, withdrawals and dramatic decreases 

in plan funding have escalated the threats to pensions and the retirees who rely on them. Of the over 1,300 old employer pension 

plans, nearly 500 are in critical to endangered funded status. 

We need the following steps. First, we need to adequately fund 

the promises that already have been made. We need to make sure 

that those who worked hard and played by the rules can count on 

getting the benefits they have earned. In short, we should not reduce funding for existing underfunded pension plans, including in 

order to fund contributions for the newly proposed composite plan. 

If you can’t fully fund one plan today, surely it will be more difficult to fund two plans tomorrow; therefore, we urge the adoption 

of any new plan design, including composite plans, not reduce the 

ability of existing plans to fully meet their current funding obligations. Reducing plan funding for a current endangered plan to fund 

a second plan simply puts at risk the benefits earned under both 

plans. 

Before acting, we urge the committee to address the following 

two key questions: are funding and transition payments adequate 

to ensure earned benefits in legacy plans can be fully paid; and 

two, can entities struggling to fund one plan adequately fund two 

plans? 

Second, we should help the plans that can be helped. A few 

dozen unions that sponsor most of the 1,300 multiemployer plans, 

the PBGC should have broader authority to advise plans and help 

them merge as appropriate to reduce administrative expenses and 

improve investment opportunities. 

Third, we need to strengthen the PBGC safety net. The PBGC 

is projected to run out of funds by 2025, and Congress must take 

steps to ensure its financial viability. Regrettably, PBGC premiums, now at $27, remained too low for too long, as low as $2.60 

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as recently as 2005, and they must be significantly increased. The 

CBO estimates that a premium of at least $127 a year is needed 

to pay guarantied benefits. AARP would support creative approaches, such as tax credits or even a partial assessment against 

monthly retiree pensions to alleviate some of the burden of the 

large needed premium increases. 

Also, the premium—the multiemployer pension guaranty re- mains low, only a maximum of $12,870 a year, a mere fraction of 

that available in a single employer system, and that’s for a retiree 

with 30 years of service, and that premium guaranty—that pension 

guaranty should be increased. 

Fourth, any new plan design should be fair and affordable. We 

are open to new pension models. However, Congress must ensure 

that any new system is fair and includes protections against the 

creation of minimally regulated plans with less certainty and adequacy that put all benefits at risk. 

Congress must ensure that participants in composite plans are 

covered by the fundamental protections included in current law. 

Notably, we urge the committee to add a specific requirement for 

annual statements that explains to participants their plan contributions, their accrued benefit, the plan funding status, and how 

accrued benefits may be reduced if plan assets fall below a certain 

level. 

The discussion draft should also clarify the vesting and benefit 

accrual rules for participants. If the composite plan becomes underfunded, the draft allows benefits to be cut, but it’s not clear how 

such cuts would be implemented, the trustees seem to have wide 

discretion in how retirees and older workers would be protected 

against large benefit cuts. 

Congress should also permit retirees to choose their own representative and also add specific protections against conflicts of interest, particularly conflicts between the legacy plan and new composite plan, and there should be adequate government oversight. 

Finally, creation of a composite plan should not be an excuse to 

reduce funding for legacy plans. Plans that are already underfunded should not be put at further risk. Also, plan trustees should 

not be given the significant discretion to reduce benefits in composite plans. That’s contrary to the protections that are in place 

generally for accrued pension benefits under all other pension laws. 

In conclusion, the multiemployer system does present a complex 

and challenging environment, and we urge the committee to continue these open discussions on the best way to improve the system, including stabilizing the PBGC. We are happy to be part of 

any fair process to find a balanced solution, keeping in mind that 

we need to protect retired workers and their families. 

And the retirement security of 10 million workers and retirees 

generally are at stake, and we owe it them to have a fair, open, 

and thoughtful process to adjust to these challenges. Thank you. 

[The statement of Mr. Certner follows:] 

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Chairman ROE. Thank you, Mr. Certner. 

Mr. Green, you’re recognized for five minutes. 

TESTIMONY OF JEFF GREEN, PRINCIPAL, HARRIS DAVIS 

REBER L.L.C., BELLEVUE, NEBRASKA 

Mr. GREEN. Chairman, committee members and staff, I appreciate the opportunity to provide an owner’s perspective of the current state of multiemployer defined benefit plans and the need to 

provide plan trustees with additional options. My name is Jeff 

Green, and I am and have been a part owner of several construction companies employing building trade union members. I’m a 

management trustee on several multiemployer plan funds and have 

a strong personal interest in the continued viability of organized 

retirement benefits for our employees and union members. 

The 2014 Multiemployer Pension Reform Act and the proposed 

ERISA changes to incorporate composite plans are welcome tools to 

assist trustees in providing secure retirement benefits. 

Unions provide a reliable pool of safe, experienced, trained, and 

productive workers to accommodate a contractor’s changing construction project demands. Through the pooling of benefits and resources, the unions and employers provide mutually-bargained 

wages and fringe benefits in line with the value provided by the 

employees and members. These workers value retirement security 

delivered through defined benefit and defined contribution plans 

administered by both labor and management trustees. 

ERISA became law in 1974 in order to address significant problems in retirement plan funding, administration, vesting, reporting, 

and transparency. Subsequent amendments, laws, and regulatory 

decisions were enacted with the intent to strengthen individual retirement security. In the multiemployer community, a consequence 

is to shift defined benefit plan financial obligations generated over 

decades under current employers. Construction employers do not 

have the financial resources to supplement retirement plans, let 

alone guarantee a plan’s benefits. Requirements that a current employer assume the unfunded liabilities for the entire plan, recognizing a given year, are onerous to contractors. Construction contractors assume risk in everything that they do, but are unwilling 

to take an unlimited and unknown defined benefit plan risks. 

I will provide some examples of the potential financial obligations that participating in a defined benefit plan places upon a contractor. We placed reenforcing steel in a parking garage in a new 

market in Ohio and paid about $200,000 in construction contributions due to a defined benefit plan over a year-long project. Our 

project costs came in higher than experienced and we had a negative margin. This happens a lot on projects. We later received a letter from the plan stating that the trustees desired to reorganize the 

plan and that our share of the plan’s unfunded liability would be 

close to $400,000 paid out over time. This would be an initial 

$400,000 that the plan expected us to pay should the plan default, 

based on working on only one job, and a job we lost money on. 

In our home market, the plan has assets of over $260 million, 

and I believe it’s very well managed and administered. Recent 

years of below expected investment returns resulted in the plan actuaries determined that the unfunded vested benefits increased 

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from $14 million to $30 million, a $16 million liability increase. 

The actuaries recognized the long-term nature of the plan and 

averaged short term results over many years to provide annual accurate plan representation. Based on the plan’s 2 million manhours worked and the $16 million change in 2015, a local contractor employing 150 individuals would be assessed about $2 million in unfunded vested benefits. This assignment of unfunded benefits in 2015 exceeds the contractor’s net profit for that year. 

Contractors are required to only note in their public financial 

statements that they participate in multiemployer retirement 

plans. There was an effort a few years ago by the Financial Accounting Standards Board, or FASB, for companies to state the unfunded vested benefits allocated to them. This proposal was not 

adopted. The proposal would be a nightmare to accurately report 

on and would show that almost all employers participating in multiemployer plans have negative equity. The plan’s liabilities exceed 

the employer’s assets. 

Financial institutions are critical to our industry for loans and 

bonding capacity. These institutions rely on the public financial 

statements to make their business decisions. Most financial institutions would have serious concerns if all defined benefit liabilities 

were reflected on a contractor’s public financial statements. 

A key element to the current plan’s abilities to address their 

funding shortfalls is to increase plan contributions, preferably 

through more hours being contributed to plans. There are practical 

limits to the hourly retirement contribution rate and the subsidy 

amount paid by existing members. Growing a plan’s participation 

requires attracting contractors with the capital and ability to take 

on additional work and employ more members. The laws and regulations intended to protect retirement security had the unintended 

consequence of discouraging employer growth and participation. 

Every retirement plan has unique circumstances and the participating employers have their own market concerns. Legislation that 

empowers the plan’s trustees to utilize all approaches to develop 

and implement the best solutions are needed. Attracting employers 

and participants into existing and new multiemployer plans are 

critical to providing the resources and strength needed for a plan’s 

long-term success. 

Thank you. 

[The statement of Mr. Green follows:] 

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Chairman ROE. Thank you, Mr. Green. 

I now recognize the chairman of the full committee, and he is 

now recognized for five minutes. 

Mr. KLINE. Thank you, Mr. Chairman. I thank the witnesses for 

being with us today. Excellent testimony, as we’re trying to solve 

the problem that some of us have been dealing with for a long 

time. 

And, Mr. DeFrehn, I think back years and some of the people sitting behind you, in the office as we tried, that is Chris, but, you 

know, we’re trying to figure out how we can do something to avoid 

the collapse and, frankly, the complete destruction of these multiemployer plans. 

And Mr. Green just testifying about the impact on employers and 

how the withdrawal liability in some cases is so high, it’s worth 

more than the entire value of some companies, auto dealerships, 

for example, and how do we grapple through this. 

And so the first thing I want to do is thank you and the members 

of the coordinating committee for working together so long and so 

hard and pushing through this, and in your work in helping us get 

MPRA without the composite plan piece through and put into law. 

I think we did good work with MPRA. I think it’s a shame that the 

Secretary of the Treasury and his special master made a disastrous 

decision in not accepting Central State’s carefully worked out plan 

to save that retirement plan. It may haunt them and all of us for 

years to come. I thought it was a complete irresponsible step. 

So now, though, we’re still trying to get that piece that alluded 

us last time and get something that will allow and encourage employers to stay in the system. That’s kind of at the core of what 

we’ve got here, excellent testimony from you, but if you have a 

withdrawal liability that is so punitive that it will put you out of 

business, why would you ever get into this thing. So I very, very 

much appreciate that work that you’ve done. 

Mr. Certner, can you—I was interested in your testimony about 

PBGC’s looming insolvency. I’d like to ask you to take a minute to 

talk about why that’s so important, and then can you describe in 

greater detail what it means when AARP says they would support 

a, quote, partial direct assessment against monthly retiree pensions? I found that to be pretty surprising coming from AARP that 

you would be assessing a new fee on retirees. Can you just take 

a minute or so here and talk about that PBGC issue and the assessment on retirees? 

Mr. CERTNER. Yes, Mr. Chairman, and thank you. We all know 

that the PBGC is significantly underfunded and we think that the 

PBGC insurance premium promise is key to protecting so many of 

these plans that may be heading into insolvency, and obviously 

want to make sure that if plans do go under, they will have the 

promised backing of the Pension Benefit Guaranty Corporation. 

So you well know the dire straits that the Pension Benefit Guaranty Corporation is in, and part of that has been a premium that 

has been much too low over the years and too low now. You know, 

the premium on the single employer side is scheduled to be $69 a 

person next year, but the variable rate of premium can go up as 

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mium right now is only at $27, dramatically too low for the system. 

So we think we need a substantial increase in the premium. 

Now, we understand the problems that many have in trying to 

accommodate a large premium increase and we’ve heard certainly 

from several of our colleagues here about the potential impact on 

some of the employers who may or may not want to be in the system, and so we are happy to explore ways to try to get that premium to a higher and more sufficient level with contributions from 

not just employers. And so, for example, we think that some of 

these plans, for example, should be eligible for some tax credits to 

help for some of the premium payments. 

We’re also willing to look at having some of the retirees pay essentially an insurance premium on their own benefits. I can tell 

you, having spent a lot of time and heard from many of the people 

who are experiencing potential cuts of 20, 30, 40, 50 percent in 

their benefits, that paying a little bit of the insurance premium on 

their amounts that can potentially go and help insure their benefits 

is a small price to pay to avoid benefit cuts of 50 percent. 

So we’re willing to look at that as part of a larger package to try 

to get those premium amounts essentially up to a level that’s acceptable and to keep the system more solvent. 

Mr. KLINE. Okay. Thank you very much. 

Mr. Chairman, I see I’m down to seven seconds. And in my usually fruitless efforts to encourage my colleagues, I’m going to yield 

back. 

Chairman ROE. I was looking forward to gaveling the chairman 

down. I didn’t get to. 

Mr. KLINE. Good work. 

Chairman ROE. Mr. Pocan, you’re recognized for five minutes. 

Mr. POCAN. Thank you, Mr. Chairman. 

First let me just speak for myself only in—you know, I do see us 

in a place of tough and tougher decisions in the sense that when 

you look at what’s caused a lot of this, one of the initial reasons 

the 2001 and 2008 stock crashes, you know, banks and auto companies got bailouts, CEOs got bonuses, and retirees are left hurting 

in essential states, the mine workers and others. 

And, you know, I just—I find it an unfortunate set of priorities 

sometimes that government has dealing with these issues. I just 

want to put that out there as a personal opinion. 

Since this is only the second hearing really we’ve had in about 

16 months, it’s the first chance we get to look at the draft, I’m 

going to ask you in under a minute, because that’s what you’re 

going to have, 45 seconds each, to take the exact opposite role of 

what you just advocated for, because I want to really know the pros 

and cons. So those of you who were advocating for it, just talk 

about what some of the potential problems are, and for those of you 

who argued against it, what some of the pros are. I just think we’re 

still trying to gather information as we’re having this conversation. 

So if we could start just right down the line. Mr. DeFrehn? 

Mr. DEFREHN. I was afraid you’d do that. 

Mr. POCAN. Yeah. 

Mr. DEFREHN. I hadn’t thought about that very much, really, to 

try to respond in the time you’ve allotted. 

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You know, it—we’ve spent so much time trying to address the 

shortcomings, it’s really hard for me to take the position that we 

think that there are some other things that argue against this, because, quite frankly, we don’t really see much option for the plans 

long-term other than to try to encourage the existing employers to 

stay in, and bring new ones in, new ones that can help fund 

through the existing legacy liabilities. That’s why this model was 

created. And we believe that we collectively, both the ones that 

participated in it the way this was designed originally, and the 

input that we received from others, including the administration, 

has made this a stronger proposal. So I think that what you’ve got 

here is— 

Mr. POCAN. I’m going to stop you just because of time, and also 

I’m going I’m going to try the question again. I know it’s hard to 

take the opposite. 

Mr. DEFREHN. Yeah, it is. 

Mr. POCAN. But, honestly, I think everyone agrees that this isn’t 

a perfect solution for everybody. We are trying to find the best solution out of a bad situation. 

Mr. DEFREHN. It’s certainly not the best solution for everyone, 

and it was never intended to be. It was only for those employers 

that are committed to leaving the system and go to— 

Mr. POCAN. Sure. I just want to make sure we’ve got time for everyone. So as honestly as you can be taking the opposite role, and 

I understand that it’s a very tough question, Mr. Terven. 

Mr. TERVEN. I think it’s an excuse me. Thank you. I appreciate 

that. 

You know, it is a very tough question. You know, I’ve been 

around for quite a while now around here and I’ve sat in a lot of 

meetings to try to figure out the pros and cons in this, and I am 

a union official, who I don’t see the benefit cut situations in a lot 

of things that I do, but I also am realistic to see that the members 

are not getting there to pay the costs that we presently have. And 

like you so eloquently said earlier, I don’t see the bailout situation 

coming out there to preserve these situations. 

I think we are looking at ways to do things ourselves together 

as a labor and management coalition, and I think that structure 

has worked well and we’ve done put our minds together and asked 

for different ideas, different solutions, and we come right back to 

this solution here. So it’s very hard for me to figure that one out. 

Mr. POCAN. Thank you. Mr. Certner. 

Mr. CERTNER. Well, I guess from my perspective, then, the answer would be that if the stock market never goes down and continues to exceed 7 percent every year for the future, then this actually could work. 

Mr. POCAN. Okay. I think I’m failing at my question, but, Mr. 

Green. 

Mr. GREEN. I’m proposing that we allow the trustees flexibility 

to do what makes sense for their plans, so the flip side would be 

to stay with the current constraints and limit the availability for 

people to do what they believe is right. And to me, that it may provide false security to existing retirees that they’ll be fine, but in the 

long-term, it’s going to be a problem. 

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Mr. POCAN. So in the remaining minute I have, if anyone can 

take this question, just walk me through with the composite plan 

how it would respond to a recession. What’s going to happen to 

payees, to people paying in? Can someone walk me through that 

real quickly, Mr. DeFrehn? 

Mr. DEFREHN. Yes, actually. I kind of welcome that question, because David’s comment about if you get 7 and a half percent, this 

could work, but, in fact, we’ve done stress testing on this, replicating the market performance for the 10-year period, including the 

2008 period, and what we found is that this new model outperforms what you might expect, and the plan—we started out 

with a plan that wasn’t very well funded to begin with, a yellow 

zone plan, saw the first 10 years getting the experience that was 

anticipated, the assumed rates of return, and then the next 10 replicates the last 10. 

And what we found was the yellow zone plan goes into red for 

two years, allocation—reallocation of some— 

Mr. POCAN. There’s three seconds left. That didn’t answer the 

question. I apologize. I know—so what I’m going to do is just realize I failed miserably at that and filling in for Mr. Polis. And I will 

yield back. 

Chairman ROE. I thank the gentleman for yielding. I now yield 

myself five minutes. 

First of all, I want to applaud both labor and management for 

coming up with this new approach. And I think a new approach is 

needed in the 21st century. And, Mr. Terven, I want you to—you 

mentioned the Canadian plan, your partners in Canada. Could you 

inform us a little bit about what they’ve done? They obviously have 

an experience, so— 

Mr. TERVEN. Thank you, Mr. Chairman. As you said too is if— 

we have a group that’s close with us from Canada, and they have 

reigned this model of the composite plan for a long time. In the 

model referenced in the New Brunswick was put in place for public 

sector employees that’s proposed here has been a better alternative 

to a defined contribution plan in which the worker must be his own 

investment manager and also his own actuary. 

I think with the plan they have, and we’ve looked at it and asked 

all of our leaders over in Canada, just what do you feel about this, 

I have not heard one bad thing since they’ve moved to this situation. So the composite plan they use has been very effective. 

Chairman ROE. Frankly, I’m very intrigued by it. 

And here, Mr. Green, you mentioned, and I have several very 

close friends in the construction business, the margins in that business now are razor thin. I mean, you bid a job and you miss it just 

a little bit, and your profit margin is like a grocery store with 1 

percent. 

We have a demographic issue in the country where—I have one 

large employer in my district that will have 2,000—25 percent of 

their workforce can retire in the next five years, so we’re going to 

have to replace those people. How do you encourage somebody to 

go into a plan, like you as a contractor, knowing that you had this 

huge—potential huge liability? How does that work? 

Mr. GREEN. Well, I think, yeah, the point there is to attract 

young individuals. And it’s hard for them to say, hey, I want to 

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pay—I want to have a secure retirement, but a lot of money is 

going to go to pay for existing problems, and so there’s equity for 

the new employees to do that. And also, you know, existing employees have the opportunity to go work for other people as well. So our 

challenge is how do we keep our existing employees and how do we 

attract new members? 

Chairman ROE. I think you’re right. And I think let me just 

briefly go over this, so to simplify it for me. This plan differs from 

a 401(k). A 401(k), as Mr. Terven said, is you’re your own actuary, 

you’re your own manager of your plan. This will allow you to pool 

these assets in a managed plan, but you wouldn’t have necessarily 

a defined amount of money each year that you would—that could 

possibly change somewhat, but a properly managed plan, you could 

rely on a fairly stable income, as Mr. DeFrehn said, over a period 

of 10 years, I’ve looked at it, and it would have no PBGC backup, 

it would have no insurance, but there would be no PBGC premium 

either. 

That money could go into the actual retirement. And I’m trying 

to think what wouldn’t be good about this plan other than Mr. 

Certner is correct, it’s allowing people to walk away from a legacy 

plan that’s already stressed. That’s—I think we have to address 

that. 

But other than that, why wouldn’t you do this? And, Mr. 

DeFrehn, I’ll leave that with you. I mean, you all brought the idea 

up with Chairman Kline. 

Mr. DEFREHN. Yes, Mr. Chairman. We—in trying to get this 

thing—balance the interests of all the stakeholders here, I think 

we’ve tried to address some of those concerns. We looked at trying 

to require—keep the employers in the system, because in the longrun if we don’t have those employers, we won’t be able to survive. 

And so we put some incentives in there to both require higher 

funding for the legacy plan, new employers coming in also have to 

contribute to their legacy plan, which will help the funding on that 

and faster fund those, but the other thing it does is it takes away 

the incentive for employers to leave the system, what Jeff was talking about earlier. 

When a plan gets fully funded, there is nothing that keeps employers in, and the accounting standards now are providing an incentive for them to leave the system. So we’ve created a bridge that 

gets employers comfortable with the notion of staying in the plan 

so that if there is a bad market, you can reallocate some of those 

future contributions back to cover the losses. If they’ve left the system, there’s no one to cover those losses and the legacy plan is 

harmed much more. 

So, you know, I think we’ve gotten what we were trying to work 

for. Obviously there’ll be other things that people identify that— 

where this discussion draft can be strengthened, and we hope that 

happens, because we want the best model for the workers here. 

Chairman ROE. Yes. And I’ll very quickly, in my little bit of time 

remaining, is before what happened in a defined benefit plan during an up year of the market, we cut the contributions. And you’re 

in a down market, Mr. Certner’s right, we haven’t done away with 

the economic cycle. I like this where you can over—you can up to 

160 percent. I’ve never heard yet in the eight years I’ve been here 

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anybody come in here and complain about having too much money 

in their pension fund. 

Mr. Hinojosa, you’re recognized for five minutes. 

Mr. HINOJOSA. Thank you, Chairman Roe and Interim Ranking 

Member Pocan. 

Today’s hearing is a step in the right direction. We must keep 

an open mind and focus on learning more about Chairman Kline’s 

discussion draft legislation. I appreciate his thoughtfulness in looking for a good solution to preventing insolvency. The working employees’ pension plan is a critically important issue that we’re discussing here today. The economic security of millions of workers 

and retirees is at stake, and we in Congress must ensure the continued sustainability of multiemployer pension plans without undermining the entire system. 

The funding problems facing plans require action on Congress’s 

part to provide plans to participating employers with solutions that 

do not jeopardize the current benefits earned by retirees. This includes our coal miners, who we must also protect to avoid a national pension crisis. 

In addition, we must not put the already underfunded Pension 

Benefit Guaranty Corporation in greater risk of insolvency. 

Now I want to go to my first question. This is addressed to David 

Certner. In your testimony, you indicated that AARP is open to 

consideration of new types of retirement plans, such as the composite plans. However, in your testimony, you gave, several recommendations that must be included to improve Chairman Kline’s 

draft. 

So which of these recommendations do you believe is the most 

important, and why? And, secondly, do you believe that AARP 

could eventually endorse Chairman Kline’s proposal if some of your 

recommendations are incorporated. 

Mr. CERTNER. Thank you for that question. I think there’s two 

issues there. One is just the question about just funding in general, 

so that if you are essentially reducing funding to legacy plans because some of that money’s being siphoned off into composite plans, 

regardless of what the composite plan looks like, can that possibly 

work? And we have strong doubts, and we’d love to see some actuarial analysis done through the PBGC about whether or not you 

could have any kind of plan established like that that’s siphoning 

money away from a legacy plan that doesn’t put the legacy plan at 

risk. So that’s sort of the first part about whether you could have 

any kind of two plans at all. 

On the second half, we do have hybrid plans currently that are 

allowed under law, things like, for example, cash balance plans 

that include features of both defined benefit and defined contribution plans. I don’t understand this new plan and what an individual thinks they may be getting from it, because you don’t have 

an account balance so you can see what your account is, and you 

don’t even have a formula that you can count on, because the trustees have wide discretion to change that formula every year. So the 

uncertainty of that plan and essentially the ability that’s given to 

trustees to cut back benefits you have earned is completely unheard of in pension law. We just simply don’t allow that. Once you 

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earn a benefit, generally speaking under pension law, that’s your 

money and it can’t be taken away. 

Here there seems to be almost an annual determination about 

what your benefit would be, and so you can lose an accrued benefit. 

And that’s particularly true, you know, if you’re going to have some 

market volatility and there’s going to be down markets. So I think 

those are probably two of the key issues. 

Mr. HINOJOSA. Thank you for responding. The next question is 

to Mr. DeFrehn. 

In the testimony by Mr. Certner, he made the case for why increasing the PBGC premiums is necessary. I am especially interested in your ideas to improve the long-term fiscal sustainability of 

PBGC. And, as you know, it is the multiemployer pension program 

which is projected to be insolvent in less than 10 years. Do you 

agree with Mr. Certner and, if yes, what do you think needs to be 

done in order to prevent this from happening? 

Mr. DEFREHN. There is no question the PBGC faces a problem. 

The agency was created as a safety net, not as an insurance company, and that is why Congress has always acted on the premium 

levels rather than having them adjusted, as an insurance company 

would. 

Mr. Certner referenced the fact that the premiums were low for 

many years and compared and contrasted that with the single-employer system. The single-employer system is an insurer, for lack 

of a better term here, of first resort. If a corporation goes out of 

business, there is no one to backstop the liabilities. In a multiemployer plan, the other employers are the insurer of first resort and 

the PBGC is insurer of last resort. That explains why we have such 

a differential on the premiums and on the guarantee levels. As a 

matter of fact, initially there was a lot of pushback towards having 

the PBGC guarantee at all. It is a necessary safety net, though, for 

plans that do fail, and we believe that it needs to be examined very 

closely. Some of the things that the Commission had looked at— 

Chairman ROE. Mr. DeFrehn, if you could wrap that up. 

Mr. DEFREHN. I am sorry. 

Chairman ROE. The gentleman’s time is expired. 

Dr. Foxx, you are recognized for five minutes. 

Ms. FOXX. Thank you, Mr. Chairman. 

Actually, what Mr. DeFrehn was saying, let me join into a comment I was going to make. When I first got on this committee in 

2005, we tackled issues related to the PBGC. Then-Chairman 

Boehner said he wondered why nobody had tackled the PBGC and 

pension issues for 30 years, and when we got into it we found out 

why. It is hard; it is very hard. And I think that is what we are 

seeing here again today. 

I would like to ask you, Mr. DeFrehn, a question: You touched 

on this issue before, but I would like you to expand on your comments related to critics who have raised questions about whether 

the proposal weakens current funding standards for legacy multiemployer defined benefit pension plans; and would you talk a little 

bit more about how the discussion draft addresses these concerns, 

to ensure existing plans are sufficiently funded. 

And I know we have four minutes, but I would like you not to 

take up the whole 4 minutes so I can ask one more question. 

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Mr. DEFREHN. Certainly. I think the short answer is that the 

discussion draft, it eliminates some of the discretion in terms of 

how the allocation of the contributions are handled. It puts in a 

minimum that is higher, through the transition minimum contribution and the current PPA levels, so that the dollars flowing through 

will adequately fund the legacy plan even if you take the 30-year 

extension—or, excuse me, the 25-year extension for the fresh start. 

As I started to mention earlier, we have done some stress testing 

on that. And we have some results that I would like to have entered into the record so you can see how that works. 

Ms. FOXX. Thank you very much. Mr. Chairman, I would ask for 

whatever he has to be entered in the record be entered into the 

record, without objection. 

Chairman ROE. Without objection, so ordered. 

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Ms. FOXX. Thank you. 

Mr. Green, my husband and I have been in the construction business off and on all of our lives, and so I thank you very much for 

coming here and explaining to people what very small margins 

most people earn by being in the business. I think some of our colleagues sometimes on the other side of the aisle think that folks 

in private business are out there making lots and lots of money 

and not being very fair to the people who they employ. And I know 

most people in private industry try very hard to make whatever 

they can to stay in business and also treat their employees very, 

very fairly. 

We have consistently heard over the years about the effect of 

withdrawal liability and how it actually provides a disincentive for 

employers to contribute to defined benefit plans. And it is clear we 

need more employers in the system if we want to provide a more 

stable system. 

Can you explain how withdrawal liability impacted your business 

and why it is so important that employers and workers have an option for a new type of plan? 

Mr. GREEN. Yes, ma’am. Most construction companies are held 

by small companies. So my wife and I personally had to guarantee 

all of our loans with the banks. And so it is a personal business 

and it is personal with the employees. 

And if you were required to show the liability on your financial 

statements, the banks and sureties would not want to work with 

you. As an example, it takes about 40 or 50 thousand dollars per 

employee in working capital just to stay in business. And it challenges—when you have a business and if you wanted to sell the 

business, prospective buyers are very concerned about what liabilities are hidden on the balance sheet. 

Ms. FOXX. Thank you very much, Mr. Chairman. I will yield 

back. 

Chairman ROE. I thank the gentlelady for yielding. 

Ms. Bonamici, you are recognized for five minutes. 

Ms. BONAMICI. Thank you very much, Mr. Chairman. Thank you 

for holding this hearing today, and I also want to thank Chairman 

Kline for his work here today. 

But I also want to emphasize that I am glad to hear that this 

is a statement about a proposal, that it is recognized even in the 

title of the hearing that this is a discussion draft. As Representative Foxx just said, this is hard. And I am glad we are having a 

discussion, because there is really a lot at stake today. 

One of the things that I think about when I am home in Oregon 

and talking to people about retirement security, which actually 

comes up quite a bit these days, it is important that we protect the 

hard-earned and promised benefits of retirees. It is important for 

the thousands of workers and retirees, for example, in my state of 

Oregon who are participants in the green zone Western Conference 

Pension Plan, for example, are that they continue to be in a wellfunded plan and are not disadvantaged as a byproduct of any proposal or legislation that we come up with here. We need to make 

sure that workers who have played by the rules can count on getting the benefits that they have earned. 

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And, Mr. Chairman, I would like to offer into the record a statement from the co-chairs of the Western Conference of Teamsters 

Pension Trust. The Western Conference, as you likely know, is a 

large and very successful plan with about 585,000 vested participants, at least $36 billion in assets. And the Western Conference 

has been well-managed and financially sound since its inception 

about 60 years ago. Its co-chairs have written to this committee to 

express their deep concern and, in fact, opposition to the composite 

legislation as proposed because quote ‘‘it would severely weaken 

the funding status of both composite and legacy retirement plans 

and cause damage to healthy plans in the broader multiemployer 

pension system.’’ 

So when one of the largest and best-managed green zone pension 

plans in the country concludes that composite plan as outlined in 

this proposal would harm workers/retirees in the multiemployer 

pension system as a whole, we as the committee should listen 

closely and work with them and others to develop a plan that 

doesn’t put so many people at risk. 

Mr. Certner, can you talk about whether the enactment of this 

legislation has the potential to reduce the likelihood of retirees receiving their well-deserved benefits? Furthermore, if this composite 

plan proposal were enacted as drafted, would retirees have a vote 

on whether or not to accept benefit cuts and would the U.S. Treasury have to approve benefit cuts? 

Mr. CERTNER. As I stated in my testimony, essentially what is 

happening here, of course, is that we are reducing funding for the 

legacy plans, and that reduced funding is going to the new composite plan. So, by definition, the legacy plan is going to be worse 

off. It is going to be worse funded. And now the plan is going to 

be responsible for—the employers are going to be responsible for 

two different plans. Particularly if there is some market volatility, 

there is going to be I think a lot of difficulty in trying to meet the 

adequate funding for both the new composite plan and the old legacy plan; and I think, because of that, it will put the old legacy 

plan more at risk. 

Ms. BONAMICI. Would there be an opportunity for retirees to vote 

on whether they need to accept a benefit cut? 

Mr. CERTNER. Well, certainly under MPRA, as established, there 

are some minimal standards, including giving retirees the right to 

vote and giving the government some authority to approve it. 

Under the new composite plans, we don’t even have that limited 

standard. That really is all at the discretion of the trustee. So there 

is I think even less protection. 

And thirdly, I would add since you are moving a lot of people out 

of the traditional system into these new composite plans, you are 

undercutting the entire PBGC premium base, because there are no 

premiums being paid for those new composite plans. And so the 

well-funded plans are then going to have to basically pick up the 

entire burden of the PBGC premium base. 

Ms. BONAMICI. Thank you. And I want to follow up on that. And 

I know Mr. DeFrehn talked about the need for some sort of comprehensive PBGC reform, and I absolutely want to align myself 

with the comments of Mr. Pocan and others about the need to 

make sure that we are protecting workers. 

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I know, Mr. Green, the majority summary of the bill asserted 

that by transitioning into composite plans, employers will have 

more opportunity to expand their businesses and hire new workers. 

But I am wondering, as far as you know, was there an economic 

analysis undertaken that provides support for that statement. And 

I know there was some talk about stress testing, but it is my understanding that the stress testing that Mr. DeFrehn mentioned 

and others, it was only done, an analysis on composite plans, but 

did not consider what happens to legacy plans at the same time. 

So do you know was there some sort of economic analysis taken? 

And maybe, Mr. Certner, you would weigh in on that as well. 

Chairman ROE. The gentlelady’s time is expired. 

Ms. BONAMICI. Maybe for the record. Thank you, Mr. Chairman. 

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Chairman ROE. Thank you. 

Ms. BONAMICI. I yield back. 

Chairman ROE. Mr. Allen, you are recognized for five minutes. 

Mr. ALLEN. Thank you, Mr. Chairman. And just a little background, our company now is 40, just celebrated our 40th year in 

the construction industry. And I remember back when I was 25 

years old and I started that company and began to, some five years 

later, think about those folks retiring. And we started a 401(k) program, and the reason we did that was because I didn’t think social 

security would be around for our folks. And so I convinced people 

that from top to bottom that, you know, they needed to provide for 

their own retirement, because I wasn’t sure that the government 

program would be around. 

And, of course, I did the same and, of course, you know, it has 

been very successful. We have only had two people retire from our 

company and they are both doing well, but you know, our workers 

are getting older, which is one of the problems we all have is that 

we have a graying workforce. And all of these pension and profitsharing programs and retirement programs are in trouble. I mean, 

it is just folks paying in versus folks taking out benefits. 

Mr. DeFrehn, you know, as far as the—there have been impediments under current law that prevent employers and unions from 

adopting, you know, these plan designs. I guess two questions is: 

One, you know, if you could go back 30 years, would this be the 

type of plan that you would look at, or what would our options be 

if we looked back and say, okay, we made these mistakes, now 

what do we do? 

Mr. DEFREHN. I think this would have been a good model. I 

mean, when PBGC was—the multiemployer guaranty program was 

put into place and they added withdrawal liability, theoretically, it 

was a good idea. An exiting employer who is leaving a plan with 

unfunded liabilities pays their proportionate share on the way out 

the door. But in practice, there are a number of exceptions that 

keep that from happening and the withdrawal liability has, in fact, 

become an obstacle rather than a help for those plans. 

So, going back to those 30 years, I think we would have reconsidered that had we known this kind of information. 

Mr. ALLEN. Yes. Again, for whatever reason, we don’t consider, 

you know, the beginning with the end in mind, again, with social 

security and some of the other programs. 

Mr. Green, in your written testimony you discussed how plan 

contributions are the key element for plans’ ability to address funding shortfalls, but that there are limits. How would this new plan 

design help employers avoid the unpredictability of increasing plan 

contributions that exist in traditional plans today? 

Mr. GREEN. The wages paid to the individual are important. The 

individual needs to believe that what he is getting is of value. The 

employer’s concern is that if they pay the fringe and they can understand that cost, will someone come back in the future and say, 

hey, you owe additional money? And so the concern is what liabilities are you stumbling into that you are not aware of? 

Mr. ALLEN. I see. As far as, Mr. Certner, your concerns with this 

composite program, how can they be addressed? 

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Mr. CERTNER. As I think I said earlier, I think there are two 

issues. One is just the funding, whether or not a plan, particularly 

one that is not well-funded, can basically fund two different plans 

and what that will mean particularly to the legacy plans, and particularly when you have more volatile markets. I would like to see 

some more numbers that show that actually can occur, because we 

have some doubts about that. 

Second of all, I think the benefit problem seems to be extremely 

ephemeral in these plans. It is not at all clear to an individual 

what they are going to be getting and how it could change basically 

every year, depending on the ups and downs of the market, and potentially deep benefit cuts that are given at the discretion of the 

trustees to make. That is an extremely unusual setup, and we don’t 

have anything like that in the pension world. 

Normally, you know, you know what you are going to get if you 

are in a defined benefit plan. And if you are in a 401(k) fund, you 

have your account balance and you know what your account balance is from year to year and it is not up to some trustee to look 

at the environment and say, well, we need to make some adjustments to benefits to not just meet this plan but to some of the 

funding that has to go into the old plan. So I think that is part of 

the problem. 

Mr. ALLEN. Thank you very much for your testimony, and I yield 

back. 

Chairman ROE. I thank the gentleman for yielding. 

Mr. Scott, you are recognized for five minutes. 

Mr. SCOTT. Thank you. 

Thank you, Mr. Chairman. Mr. Chairman, we have heard a lot 

about whether you pool the assets or slice them up. Frankly, it is 

like having a pizza. You don’t have more pizza if you cut it into 

slices; you still have the same amount of money. And whether or 

not we are going to have enough money to pay out the benefits 

really doesn’t depend on whether you slice it into separate accounts. 

Mr. Certner, you know, when you have a defined benefit plan, 

the employer takes all the risk of a downside in the market. If 

there is an upside in the market, the employer benefits, but the 

employee gets what he gets. If you have a defined contribution 

plan, the employee takes the risk of a downside in the market, but 

also gets the benefit if there is a surprise upside. 

Who takes the upside and downside risk with the composite 

plan? 

Mr. CERTNER. It seems to me most of the—I mean, it could be 

either way here, because part of the answer could be that if the 

market goes down, the employers would need to contribute more, 

and that is normally what it would be in a defined benefit plan. 

But at least what I am hearing from my colleagues here is that 

employers won’t contribute more and then, therefore, the risk is 

then really put back on the employees and the retirees on the composite plan and the legacy plan, because I think what I am hearing 

will happen is that you can only get so much more out of the employers. The employers don’t want to take on any more of the risk 

and the liability and, therefore, when you hit market volatility, 

there is going to be a dramatic level of underfunding that since the 

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employer is not making it up is going to shift it right back onto the 

employees and the retirees. 

Mr. SCOTT. So the employees take the downside risk. What about 

the upside, who enjoys the upside surprise? If there is higher return than you would expect, who gets the benefit of that? 

Mr. CERTNER. I am probably not the best one to answer that, because I am not sure what happens with that upside— 

Mr. SCOTT. The employer would not have to contribute as much, 

so he would get the benefit of the upside. 

Mr. CERTNER. The employer would benefit from it. You know, I 

guess, in theory, you could take some of that money and share it 

with your employees, but in all likelihood, the employer I think 

would use it to offset any contributions they need to make. 

Mr. SCOTT. You indicated the problem with dealing with the legacy plan at the same time you are going to a new plan, you put 

both at risk. Is there a separate calculation as to what you—if you 

go into a new plan, is there a separate calculation as to how much 

you have to put into the legacy plan, over and above, what you 

need to fully fund the new plan, or do you have the same calculation and just try to make up the best you can what you owe on the 

legacy plan? 

Mr. CERTNER. What I gather, what basically they are doing is 

they are stretching out the contributions that are made to the legacy plan. In other words, they are contributing less to the legacy 

plan each year, because of it being stretched out over a longer period of time. So that means there needs to be an additional contribution from the composite plan as well. As I think I sort of alluded to earlier, if the markets are doing well and never go down, 

then that money will be there to transfer and make those contributions. But should there be a down market or some volatility, I am 

not sure where that money comes from. I don’t know how we keep 

those plans well-funded. 

Mr. SCOTT. You have also mentioned the retirees. Does a retiree 

pay into the PBGC? 

Mr. CERTNER. There will be premiums paid on anybody who is 

in the premium base, but all these composite plans would be out 

of the base. There would be no premiums on them. 

Mr. SCOTT. Is the retiree paying premiums? 

Mr. CERTNER. The retirees are not paying anything today. They 

are paying premiums on behalf of any of the participants, the employers. 

Mr. SCOTT. The employers pay a premium into the PBGC for 

someone who is fully retired? 

Mr. CERTNER. Right, for any of the participants in the plan. 

Mr. SCOTT. Mr. Green, you mentioned, in your testimony you 

talked about the last man standing rule and all the bizarre things 

that happen to employers who participate. What would be the 

downside of just repealing the last man standing rule? 

Mr. GREEN. I believe that the purpose of the last man standing 

rule is to ensure that moneys are paid for the retirees. 

Mr. SCOTT. And then what happens if nobody wants to come in 

and take those liabilities? 

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Mr. GREEN. If no one would take those liabilities, the employers, 

it wouldn’t be a concern for them, but then there is really no guarantee of retirement benefits. 

Mr. SCOTT. If you repeal the last man standing rule, wouldn’t it 

be more likely that new employers would come into the plan? 

Mr. GREEN. The last man standing rule applies when the plan 

is basically being liquidated. The concern is, is for existing benefit 

plans, what additional liabilities are there. My testimony, the 

Omaha plan is very, very well-funded and well-managed. However, 

in 2015, there was a $60 million shortfall that would be reflected 

by the employees. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Chairman ROE. I thank the gentleman for yielding. 

Mr. Walberg, you are recognized for five minutes. 

Mr. WALBERG. Thank you, Mr. Chairman. 

Thanks to the panel. Mr. Green, after your conversations with 

labor and management representatives, do you believe that the 

composite plan structure will be adopted within the industry, and 

will it help the workers and employees, in your mind? 

Mr. GREEN. I believe providing the trustees additional tools to 

meet their needs will be adopted where it makes sense. We are not 

talking about requiring people to follow these plans. It is another 

option for them. 

Another point I would like to make, as Congressman Allen 

knows, construction people are very—it is a personal business. We 

are very, very protective of our employees. And so any—if we—and 

trustees, if we do something, we want to do it for the benefit of our 

employees. 

Mr. WALBERG. As employers and workers move to adopt the new 

plan designs prospectively, underfunded legacy liabilities must also 

be addressed. 

Mr. Green, will employers continue to fund liabilities attributable 

to legacy defined benefit plans as well as under the rules prescribed by the draft legislation? 

Mr. GREEN. I believe employers are willing to help pay for underfunded legacy plans. Their concern is, if I pay money now, will I 

owe money in the future? So if we say, hey, we are going to pay 

money now and that is it, there is no problem there. 

Mr. WALBERG. Thank you. 

Mr. Terven, your written testimony noted that your union’s 

members participated in more than 150 multiemployer defined benefit plans. How many of those plans are facing financial difficulty 

and underfunding? 

Mr. TERVEN. Thank you. I don’t have the specific numbers regarding the number of plans facing the funding challenges, but I 

do know that the construction industry tends to have better funding experience than do many other industries. Nevertheless, this 

new model is envisioned as an alternative for some plans and an 

additional component of some of our larger and regional or national 

plans. 

And as so eloquently stated by quite a few people today, the important thing for all of us to remember is, this is a voluntary alternative which will provide adequate funding for both models. And 

we are not suggesting a new form of a defined benefit plan for inCEWDOCROOM with DISTILLER

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dustries where the existing model has existed and is working well. 

The defined benefit plans will still provide the gold standards. 

However, for situations where the employers have determined 

they can no longer accept the risk associated with the existing defined benefit model and are determined to exit the system in favor 

of the current 401(k) system or no system, the composite plan provides a viable alternative that mitigates some of the volatility of 

the benefit adjustments inherent in daily valued benefit contribution plans and allows higher benefits to be paid than would possibly be paid. By spending down the account balance of a 401(k) or 

even using this as a balance to purchase annuities. 

Mr. WALBERG. So you would expect that many employers will 

end up leaving defined benefit plans? 

Mr. TERVEN. Every meeting I go to that is a labor-management 

meeting that I have been to in the last two years has talked about 

everything on withdrawal liability. Everything that they keep coming to us over and over again is that they can’t compete with withdrawal liability, because it is like an invisible boogieman at the 

bank saying, you may be required to pay certain amounts of money 

and we don’t know what it is. But these are family businesses that 

are very, very concerned about that factor and this withdrawal liability around their necks. 

And we can’t survive without contractors, because our contractors put us to work, and it also brings in the younger people that 

we try so hard to bring into these systems. So we are looking for 

viable alternatives, not in a locked-out system like I heard earlier 

today. 

We have to change and change with the times to make sure we 

can make sure these are viable defined benefit plans and plans for 

our retirees. 

Mr. WALBERG. I appreciate hearing that realistic perception that 

there has to be that working relationship, contractor-employee. It 

has to work for both of you. 

One final question, Mr. Terven. One feature of the composite 

plan structure is that it removes the threat of withdrawal liability. 

Based on your discussions with employers, do you believe that this 

new structure will attract employers and how will it affect your industry? 

Mr. TERVEN. The recession in the construction industry I believe 

was really a depression, and we had devastating unemployment. 

We are still trying to get out of it. And it has these pre-recession 

losses, but they affected our plan funding in such a way that subsequent investment gains have depressed hours of contributions. It 

resulted in the re-emergences of these unfunded liabilities that you 

are talking about that serve as an impediment to the entry of new 

employers. When we have been out trying to organize new employers, they keep bringing up the fact of this withdrawal liability and 

that if it wasn’t in front of them, they would be glad to be a part 

of the organizations that we try to do to take care of the workers. 

Because they want something for their workers. They like the plan 

that we have. They are just trying to figure out how to get away 

from this unfunded liability. 

And I think that the new plan design—I will say this. We referred to the composite structures as defined contribution plus 

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rather than a defined benefit minus, by addressing the shortcomings of each one of them. And I think this gives the trustees, 

labor and management, equal representation to say, does this best 

fit our plans and how do we proceed forward to ensure the viability 

of lifetime benefits. 

Mr. WALBERG. Thank you. I yield back. 

Chairman ROE. The gentleman’s time is expired. 

Ms. Wilson, you are recognized for five minutes. 

Ms. Wilson of Florida. Thank you, Chairman Roe and Ranking 

Member Polis for your leadership in holding today’s extremely important discussion on preserving retirement security for America’s 

working families. I applaud the bipartisan efforts of my colleagues 

in working together on the issue of multiemployer pensions. 

We work on this issue because we understand how important it 

is for workers to have the peace of mind of knowing that the pensions that they have come to rely on are solvent and will carry 

them through their later years. Every person who works hard to 

earn his or her pension deserves to have that entire pension. 

I am a strong supporter of defined benefit pension plans that 

provide guaranteed lifetime income to retirement. So as we examine these plans today, let us be sure that the plans are fair to both 

participants and employers, these new plans, and protect the hardearned retirement benefits of American workers and retirees. 

We must make sure that these alternative plan designs mitigate 

risk to employers, but we also must make sure that these new alternatives do not shift an excessive amount of risk onto workers. 

We must also be sure that the plans continue to pay out reasonable 

benefits and that safeguards are in place to prevent plans from 

going underfunded, jeopardizing workers’ retirement. 

This proposal does not go far enough to ensure the retirement security of American workers and other participants in multiemployer pension plans. I am also concerned that it could permit unprecedented cuts to retiree benefits and is not protected by the 

Pension Benefit Guaranty Corporation. 

I am currently reviewing and reserving judgment on the draft 

while approaching the process with an open mind. I believe all 

sides must be heard and have their views taken into consideration. 

If the committee and Congress as a whole decides to act on this important issue, we must make sure that it is manageable for all concerned, especially retirees. The last thing we need is for us to fail 

in our efforts to get this right. 

And as we consider improving and ensuring the solvency of pensions, just as a strong reminder, we must keep in mind our coal 

miners, whose pensions and health benefits are in dire jeopardy. If 

Congress does not act on the Coal Healthcare and Pensions Protection Act, over 20,000 retirees stand to lose their health benefits by 

the end of the year. 

Mr. Certner, would the enactment of this legislation reduce the 

likelihood of retirees receiving their well-deserved benefits? 

Mr. CERTNER. I think that is the ultimate concern here, is that 

if you are moving retirees into legacy plans and you are essentially 

having to fund another plan, there simply won’t be enough money 

to fund both plans. And we know from the start you are reducing 

the amount of money going into those legacy plans. At the same 

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time, you are moving all of these companies or these plans out of 

basically the premium system, the PBGC premium base, because 

the composite plans don’t pay premiums. So there is no insurance 

premium even going into the backstop. 

So these legacy plans are going to be left with less funding and 

then having to compete with funding with the new plan that has 

some, you know, limits and caps on money going back and forth. 

So we think it puts those legacy plans much more at risk than they 

are today. And, of course, we know today we have nearly 40 percent of the plans that are in some kind of endangered funding status. 

So we think it is just going to make those plans even more at 

risk; therefore, putting the retirees more at risk and putting the 

PBGC losing its premium base more at risk. 

Ms. Wilson of Florida. At risk of what? 

Mr. CERTNER. Well, risk of plans going under, there not being 

enough funding, and the PBGC not having enough money even to 

provide the guaranteed backstop. 

Ms. Wilson of Florida. Well, Mr. Green testified that this plan 

would attract employers and expand the funding base of pension 

plans. Do you agree with that? 

Mr. CERTNER. I think that is somewhat speculative, but even if 

they do come in, if we hit a market downturn then I think this is 

going to be very difficult for them to deal with, because you hear 

them all saying that the employers don’t want to have increased 

liability. They don’t want to—you have to contribute more. They 

don’t want to pay additional PBGC premiums. 

So they want to go into the system, but they don’t really want 

to have to expand their liabilities, and that is exactly what would 

happen in a market downturn. So if the market goes down, as it 

will ultimately do, it is going to I think leave some of these plans, 

both the composite plan and the legacy plans, I think in a very difficult situation. 

Ms. Wilson of Florida. Thank you very much. 

Chairman ROE. The gentlelady’s time is expired. 

Mr. Guthrie is recognized for five minutes. 

Mr. GUTHRIE. Thank you, Mr. Chairman. 

I appreciate the opportunity to be here for us to try to get our 

hands around how we can help people preserve their hard-earned 

retirement benefits in a way that is sustainable. So that is the intent of everybody here. 

So, Mr. Green and Mr. DeFrehn, I have a question. Under current law—so as employers consider adopting new plan designs, are 

there options under current law that they could consider and how 

do these compare to the draft? Could they already do this now? I 

have had some discussions where people say there is not necessarily this but other options. And, if so, what could they do and 

what is different from the draft? 

Mr. DEFREHN. There are a number of different options that employers can adopt. Cash balance plans can be adopted. They have 

not been popular. They have their drawbacks as well. 

Once again, I think there is a fundamental misunderstanding of 

what is trying to be accomplished here. We are not talking about 

reinventing a defined benefit system, and that is why there is no 

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PBGC premium. It is not a defined benefit plan, and the PBGC 

was created to protect defined benefit plans. 

Instead, what we have is something that is viewed as a shared 

risk or defined ambition plans elsewhere in the world, where they 

have been in place for some time. Recognizing that the markets are 

not as dependable and more volatile than they have ever been, 

what we are doing is we are making sure that the workers, rather 

than being handed a savings account at the end of their career, will 

receive a regular monthly pension benefit. 

The volatility here, we should be not comparing this with the 

current defined benefit system; we should be looking at a 401(k). 

Every day the market changes; your benefits go up and your benefits go down. This model allows a more modified, moderated approach, where the adjustments are made annually, based on the 

market performance for the plan for that year. It is according to 

a hierarchy that spells out, first, you negotiate additional contributions or adjust further accruals. If the plan is sufficiently harmed 

by a bad market, then you do what you can do under the DB system in a red zone plan, reduce subsidized early retirement benefits. 

And it is not until there is a catastrophic event that you would 

be—and all of those other options are exhausted that you would invade anybody’s benefit that would be in pay status or the core benefit that could be paid. 

So I think this model is one that should not be viewed as a defined benefit plan and things like a vote on what changes are made 

to the accruals. But the last discussion draft deals with the kind 

of discretion that would otherwise be up to the trustees by specifying that you have to go through these hierarchies before you can 

adjust the benefits and pay status. 

So, in effect, what we are doing is we are protecting the pensioners far beyond what they are protected in a current 401(k), and 

that is really the model we should be looking at as the comparison. 

Mr. GUTHRIE. Mr. Green, anything to add to that? 

Mr. GREEN. Two points. The first point is, as a trustee, it would 

be hard to come up with your own plan. I mean, there is a lot of 

overhead to getting that done. So having good guidelines that have 

been reviewed by Congress and approved and a regulatory agency 

would be a huge plus. 

And the second point I would like to make is the assumption that 

the amount of money coming in and contributions will stay the 

same is not valid. I mean, I believe that adopting different plans 

will bring more money in and more contributions, which will help 

us; but I am certain that the current regulations are hurting that 

and it is pushing money out, and so we need money coming in. 

Mr. GUTHRIE. Thanks. I have a pretty long question so I will try 

to get to it quickly and give you time to answer, Mr. DeFrehn. 

I have an employer in my district who said his withdrawal liability is worth more than his business right now and in that situation. 

So I know you all touched on it already, but I want to ask this 

question, Mr. DeFrehn: One of the biggest problems facing employers in the multiemployer pension system is withdrawal liability, 

the exit fee that the employer is supposed to pay upon leaving the 

plan. The prospect of this liability can be a significant detriment 

to employers contributing to a plan and a deterrent to attracting 

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new employers. However, the purpose was to require that employers actually pay for the benefit liabilities attributed to their employees. The composite plan proposal does not include withdrawal 

liability. 

How can a plan ensure that the benefit promises are adequately 

funded if employers are not required to pay a fee if they leave the 

plan? 

Mr. DEFREHN. Similar to a 401(k), the contributions are coming 

into the plan, and you take that contribution, you project it forward 

for 15 years at the assumed rates of return and you see whether 

you are meeting your funding targets. You have to be 120 percent 

before you can make any changes to improve benefits; and below 

that, if you are not at the 120, you have to adjust to make sure 

that the plan is adequately funded. 

Mr. GUTHRIE. Thank you. My time is up. 

Chairman ROE. I thank the gentleman for yielding. 

Mr. Jeffries, you are recognized for five minutes. 

Mr. JEFFRIES. Thank you, Mr. Chairman, for this hearing, for 

your leadership on this issue. I also want to thank the ranking 

member. 

This is a very important issue in the context of what constitutes 

the American Dream as we know it. The American Dream I think 

can be broken down into the notion that if you work hard, earn a 

living wage, you will have an opportunity to provide for your family, to purchase a home, to send your children to college so hopefully they can have a better life than the one that you had, and 

then to retire with dignity and security. 

And we know if you look at the different elements there, though 

the economy has recovered significantly over the last eight years, 

because of structural changes that we have experienced for more 

than 40 years: We have an underemployment phenomenon that exists in this country; we have skyrocketing costs related to higher 

education that have increasingly made it difficult for middle class 

families, working class families to send their children to college; 

and then, of course, challenges as it relates to retirement security. 

And so while we have to deal with the underemployment issue, we 

have to deal with home ownership and higher education access, 

certainly retirement security is a critical component of the American Dream. 

In that regard, a few questions. I will start with Mr. Certner. 

Composite plans are exempt from paying PBGC premiums. Is that 

correct? 

Mr. CERTNER. Yes. 

Mr. JEFFRIES. And so I guess as a result, is the expectation that 

PBGC premiums will drop significantly under a composite plan if 

it is adopted? 

Mr. CERTNER. I would have to think so, because there would be 

more people in the composite plan than left in the legacy plan. So, 

for that employer, the PBGC premiums would drop. 

Mr. JEFFRIES. And am I correct that PBGC is currently projected 

to deplete its funding in about a 6-year period? 

Mr. CERTNER. 2025 I believe is the latest projection. 

Mr. JEFFRIES. And so if that depletion takes place under current 

projections and if a composite plan was adopted, which presumably 

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would accelerate it, how does that leave, you know, retirees in the 

context of the volatility that you have spoken about in terms of the 

market? 

Mr. CERTNER. I think that is part of our concern. We obviously 

have a number of problems in the system, but one of the problems 

is to stabilize the PBGC. And what this proposal seems to be doing 

is moving more plans out of the PBGC framework, so there won’t 

be any premium payments on those plans; plus, actually, over time 

I think it is going to make it easier to withdraw from the system 

as well. So that will drive even more companies out of the PBGC 

framework. 

So initially you are going to have some taken out of the framework. Over time, you are going to have even more that can get out, 

because withdrawal liability will be reduced. So if you start having 

a run to the door of companies leaving, the PBGC is already on the 

verge of collapse. We need to do some tough things to shore it up. 

I don’t know how we can do that if everybody is running out the 

door. 

Mr. JEFFRIES. I yield now the balance of my time to Representative Bobby Scott. 

Mr. SCOTT. Thank you. 

Mr. DeFrehn, I had asked previously about the fact that if there 

is a downside market, the employee can suffer from the downside 

market, and you seemed to disagree when I said that they did not 

enjoy the upside. If there is a surprisingly good market, how would 

the employee benefit? 

Mr. DEFREHN. Well, Mr. Scott, remember that these are contributions that go into a trust fund. And the gains that are realized 

by the assets that are invested in the trust fund remain in that 

trust fund for the benefit of the participants. The level of benefits 

and when benefit improvements are made, there are some restrictions on being able to spend a windfall profit too quickly; but basically, the collective bargaining process is one where the benefit 

would be improved once you get above that 120 percent. So they 

would share in those gains. 

Mr. SCOTT. Is that mandated or discretionary? 

Mr. DEFREHN. It is discretionary until you get to the point where 

the maximum deductible is hit, and that is currently at 140 percent 

of the funding level. Beyond that, then the benefits would have to 

be spent or the employers contributing to the plan would no longer 

be able to deduct these contributions under current— 

Mr. SCOTT. Would the contributions continue to be required? 

Mr. DEFREHN. Yes. In our system, although in a single-employer 

environment, employers often, when they hit their funding target 

or they meet even their minimum funding requirement, that is all 

they put in. Here, the contributions are negotiated. And so those 

contributions are coming in anyway. And— 

Mr. SCOTT. So the contributions would continue to have to come 

in, and any upside from that would accrue to the benefit of the employee? 

Mr. DEFREHN. That is correct. There is no way to have these assets depleted by the contributing employers. Once they are in the 

trust, they stay in the trust. 

Mr. SCOTT. Thank you, Mr. Chairman. 

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Chairman ROE. Thank you, Mr. Scott. 

Mr. Grothman, you are recognized for five minutes. 

Mr. GROTHMAN. Mr. Terven, do I have that right? A feature of 

the composite plan design is a more flexible benefit structure that 

is just based on assets and the funds. Are you comfortable with 

that structure? And, when coupled with the conservative funding 

requirements, are you satisfied that this will provide adequate income security for your members even if the benefits go up and 

down? Would you be satisfied with that? 

Mr. TERVEN. Yes, sir. But I would also like to remember, we are 

not suggesting a new form of defined benefit. As I said earlier, 

where a defined benefit is in place and it is strong and it is structured, it is the gold standard, it will stay there, all right? But I do 

feel that this alternative benefit will help increase more hours for 

people to have in their system to be able to afford their benefits 

and bring in new contractors and new employees. 

Mr. GROTHMAN. Okay. A question for Mr. Green. You are a trustee. You know that defined benefit plan trustees make decisions affecting active workers, retirees and employers. The draft legislation 

would empower trustees to manage all aspects of the plan, including the benefits. Could you comment on that or how seriously you 

think the trustees will take their responsibilities? 

Mr. GREEN. Trustees take their responsibility very, very personally. I mean, we have labor and management, both representatives 

there. Most of our retirees and participants are known on a firstname basis. In Omaha, we have about 4,000 actives in the plan. 

And so we take it very seriously. And then also, the labor side talks 

to their members and they are very well-represented. 

Mr. GROTHMAN. Okay. I will yield the remainder of my time to 

the chair. 

Chairman ROE. Thank you, Mr. Grothman. 

I think what we are hearing today—and I am really glad we are 

having this hearing—is that we have opened up I think an option 

that business has to have. Let me just say this: Why would any 

new company go into a plan and accept a huge withdrawal liability 

that may exceed the value of their company? I can tell you I 

wouldn’t do it with mine. I can flatly tell—Mr. Terven, I can flatly 

tell you that. I wouldn’t put my company and my employees at that 

risk, because I might bankrupt and they may lose their jobs. Why 

would I do that? So I think offering this new option, and what Mr. 

Terven said, we have an example already in Canada where he has 

not heard anybody complain about that system, about that plan. 

And, Mr. Certner, I agree. Look, we have underfunded plans. 

That is a problem, there is no question about it. And we can’t allow 

those plans to get worse, because we have got 10 million people 

and those retirees depending on that. But as we gray and age, as 

Mr. Allen was saying, in this country, we have got to figure a way 

to get younger new workers in plans that work for them and work 

for the business that employed them. 

So, Mr. Terven, I am going to open up for you. You said it once 

and I want you to say it again. I think this is essential for the survival of the multiemployer pension system. 

Mr. TERVEN. Thank you, Mr. Chairman. I cannot say it enough. 

I have watched this business for a long time move around and I 

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have watched, and I have watched a large employer be told to me 

that they could write a billion dollar check to walk away from unfunded liability. We cannot afford in these industries to lose these 

contractors that are supporting our members and the workers in 

this country to walk away with a billion dollar check and have no 

benefit structure for the future that we have going here. 

And if our contractors cannot compete or do not know what that 

percentage of unfunded liability situation will continue to be—and 

one of the things that was touched on that I would like to, if I 

could, was the legacy plan. 

It is my understanding on this one, because the people are talking about starving out the legacy plan, but it is my understanding 

that those involved—and I have been around with these guys for 

a long time in some of these meetings. The key component of those 

meetings shared the understanding that the promises and obligations made to those in the existing defined benefits would be honored in their entirety. The discussion draft I believe moves that 

ball forward on the objective by clarifying that legacy plans have 

first call on the contribution provided on a specific funding regimen 

in which the funding of the legacy plan is the greater of the requirements. So I don’t see how that is going to be detrimental to 

our legacy plans. 

So I think it is a great option and I think it is the one we have 

to have if we are going to sustain future benefits for our people. 

One of the areas— 

Chairman ROE. It puts another tool in the toolbox. 

Mr. TERVEN. Exactly. Here’s a good thing. 

Chairman ROE. I am going to have to interrupt you, Mr. Terven. 

My time has expired for the second time. 

And thank you, Mr. Grothman. 

Mr. Courtney, you are recognized for five minutes. 

Mr. COURTNEY. Thank you, Mr. Chairman. 

I want to thank all the witnesses here. I mean, this is obviously 

a very serious group of individuals who are sincere and thoughtful 

in terms of the hard work that you have done. I am very concerned 

about the way this process is evolving, though. We saw this movie 

two years ago and, as Chairman Kline, who is a serious, thoughtful 

guy and was deeply involved in the pension language that was put 

into the CRomnibus, tested that, you know, the way it has evolved 

with the Department of Treasury’s interpretation, it is the law of 

unintended consequences in terms of just what has happened here. 

And, again, it is obvious we are not going to have a markup. You 

know, the chairman had his kind remarks for Mr. Hinojosa which 

were well-deserved, but, frankly, that kind of sends the signal. This 

subcommittee is not going to do a markup. We are not going to 

have a full committee markup. We are days away from recessing 

until lame duck. And the only opportunity to enact this is going to 

be as part of probably some kind of omnibus bill. 

And I just think that, you know, we are going to have the same 

kind of comments that Mr. Kline made earlier today about the fact 

that, well, you know, it really didn’t evolve the way it was supposed to. 

I mean, Mr. DeFrehn, you have mentioned a number of times the 

fact that the administration has weighed in with comments and 

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suggestions, but, for the record, have they endorsed the draft recommendation? 

Mr. DEFREHN. I haven’t spoken with anybody about the draft 

proposal since— 

Mr. COURTNEY. You are not aware then that the Department of 

Labor or the Pension Benefit Guaranty Corporation has publicly 

endorsed this package. Isn’t that correct? 

Mr. DEFREHN. I believe that they are in the process of evaluating 

it. At least— 

Mr. COURTNEY. And that is fine. That is fine. But the bottom line 

is here, we are talking about doing something that affects millions 

of people and, you know, it is handle with care for all the reasons 

that you have all said from both sides of the issue here. And, you 

know, there clearly is opposition, as we see here this morning. And, 

you know, some of the comments that Mr. Certner has made about 

ways to improve this approach are not going to get incorporated. 

I mean, let us face it. You know, you guys have sort of come together with a package here, I understand that, but the fact of the 

matter is this process is over, in terms of really what the language 

is going to look like. I mean, look at the calendar; it is just common 

sense. 

And, you know, I guess the only thought that, you know, I was 

going to propose is that, you know, clearly we have a division here. 

We have got the trades who, you know, support this approach. We 

have got industrial unions which oppose this approach. We have 

folks who are representing seniors that are, again, negative in 

terms of this. 

You know, why can’t we sort of move a little slower in terms of 

a phase-in, with some type of pilot approach for those sectors that 

feel that this is existential in terms of the future? And, Mr. 

Certner, maybe you can just sort of comment on that. Why do we 

have to sort of force this into the entire spectrum of pension plans, 

given the fact that the process is not proceeding with regular order 

and that we have still got kinks that we have to work out? 

Mr. CERTNER. I agree. I mean, obviously, the discussion draft 

just came out recently and these folks may have been spending a 

lot of time with it. But if you are talking about a discussion between union and management, you know, I think you know unions, 

by law, don’t represent retirees. And that is the problem and one 

of the reasons we are here today is because, you know, we think 

in many cases they are getting the short end of the stick here. 

And we understand that there are a lot of concerns about making 

sure this continues in an ongoing fashion, but we want to make 

sure we take the right processes to protect retirees. Our pension 

laws have been very clear over time that when you have an accrued benefit, it is earned, it can’t be taken away. And we are playing with a fundamental rule of pension law. 

And I know there are huge problems here, but we have given 

over incredible discretion to trustees under these new composite 

plans to make changes to benefits on an annual basis. I don’t know 

how you could even tell a participant what their plan benefit is. I 

don’t even know how you would describe it, because the trustees 

can change it every year. That is not the way pension laws worked 

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bus would be a pretty dramatic change without, I think, a lot of 

due consideration. 

Mr. COURTNEY. Thank you. And I would just say, you know, for 

the trades, you know, one of their mottos is measure twice, cut 

once. We are not measuring twice here. That is not the way this 

is moving forward. 

And, again, George Miller was my hero, you know, as a member 

on this committee. He worked very hard in that package 2 years 

ago and, frankly, it just has not evolved the way I think the proponents, as Mr. Kline said, envisioned. And just it is a cautionary 

tale for all of us in terms of just, you know, using the lame duck 

session as a vehicle to make a change that is just that widespread 

in terms of impact on retirees. 

I yield back. 

Chairman ROE. I thank the gentleman for yielding. 

Mr. Polis, you are recognized. 

Mr. POLIS. Thank you. My first question is to Mr. DeFrehn. 

There is a continued concern, as we heard expressed, that legacy 

plans will be underfunded. Of course, we don’t want legacy plans 

to descend into distress. AARP has raised several concerns regarding funding of legacy plans, including the requirement that 25 percent of the contributions go to the composite plans. 

Mr. Certner testified moments ago that the provisions in the discussion draft that permit existing plans to divert current plan contributions to a composite plan will likely lead to harmful outcomes 

for those left behind in legacy plans, end quote. You got to hear 

that. 

Do you agree that this could lead to harmful outcomes? If not, 

why not? And can you explain why it is important to set the 25 

percent requirement mentioned in the statute? 

Mr. DEFREHN. Yes. And thank you for your question. The stress 

testing that I referred to earlier was just done, was completed 

based on the discussion draft, which shows clearly that the requirements under the law to have the greater of the transition minimum 

or the current PPA requirements will continue to allow those legacy plans to be fully funded in a reasonable period of time. 

And even testing it against the 22 percent loss that was incurred 

in 2008, these plans, a yellow zone plan would fall into red for 2 

years before it returns by simply reallocating contributions by the 

bargaining parties, not by the trustees. 

So I believe that is certainly a clear option here. 

Mr. POLIS. Do you agree with Mr. Certner’s testimony that permitting existing plans to divert current plan contributions to a 

composite plan will likely lead to harmful outcomes for those who 

remain in legacy plans? 

Mr. DEFREHN. Not at all. You have to remember that a defined 

benefit plan is comprised of two portions: One is paying off the existing accrued liabilities; and the second is the normal cost or what 

you are putting in for future service and current service. What we 

are doing here is we are simply splitting off that second piece that 

would normally have to be funded out of the same plan. It is now 

being funded in a plan that has no risk, and it has some different 

features to it. 

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Mr. POLIS. I have a couple more questions to get in. But, as you 

know, some groups who represent workers have taken issue with 

the fact that the draft allows for an employer to amortize his existing legacy plan liability over a quarter century. They prefer a 

shorter period, like 15 years that is in the pension-protection-act. 

Your testimony got into that a little bit, but could you briefly 

elaborate on why you think 25 years is appropriate instead of 15 

years? 

Mr. DEFREHN. Certainly. And this comes back to your earlier 

question as well. It has to do with the new employees and the current active employees. We have to make sure that the active employees remain as supportive as the employers, because when you 

get to the bargaining table, it is just as easy for the union to say, 

we are going to bargain out of the existing plan and go to a 401(k), 

as it is for the employer to do that. 

We have examples. For example, there is a construction industry 

plan in the Midwest where the contribution rate is over $19 an 

hour. If you are working 2,000 hours a year, that is $38,000 a year 

you are putting in. The active employee is getting 90 cents of that 

$19 for his own retirement. We have to make sure they have a benefit, and that is where the extended amortization is required. 

Mr. POLIS. Mr. Terven, and while today’s hearing is about a specific issue relating to pensions that are very important, we also 

need to think about this in the larger context of protection and benefits for employees. 

I recently introduced a labor package that would enhance labor 

laws, so we can provide workers a fair shot at obtaining and maintaining good jobs with livable wages, setting higher standards for 

employers. When I talk with workers in my district, they often 

bring up their concerns around not being paid the overtime they 

deserve. And for some, that they aren’t getting the wages they 

should have earned. They have been victims of wage theft. 

Unfortunately, the current rules and the Fair Labor Standards 

Act are often either ignored or not taken seriously. For too many 

Americans, wage theft and ignoring workers’ rights to overtime is, 

sadly, part of their experience. 

Can you speak to the importance of beefing up penalties for violating FLSA and how workers could benefit from tougher penalties 

on bad actors? 

Mr. TERVEN. Thank you. I think a fair wage or a livable wage 

discussion cannot be limited to just payment per hour, week, 

month, or the year. A fair wage must also include a pension that 

will provide for workers when they retire. And we have to make 

sure that the pension will be there when the employee retires and 

that it will sustain them over their retirement years. And this is 

why this hearing is so important. 

And for many workers and the members of our union and other 

unions, the question of the sustainability of their pensions under 

the current economic conditions and past practices is a very serious 

matter. It is very serious to the members of our union, to the employees of our employers, and the employers themselves, as it affects the sustainability of a talented workforce in a competitive 

company. 

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So when you raise the issue of the fair wage or livable wage to 

support a family, for education of their children, for the purchase 

of a home, to provide for their health care, yes, it must also include 

the adequacy and sustainability of their pensions. And I commend 

you for raising these issues, and I look forward to working with you 

and the other members of this committee, hopefully in a bipartisan 

manner to make sure that America’s skilled workforce can continue 

to earn the wages that support their families and have those protections and provide for the retirement. There is a lot of work to 

be done in America today and on behalf of the employees and the 

employers to try and make this a reality for all men and women 

in America’s remarkable skilled and talented workforce. These 

issues cannot be separated. 

Mr. POLIS. Thank you, and I yield back. 

Chairman ROE. I thank the gentleman for yielding. 

And, again, I would like to thank our witnesses for taking the 

time—it has been an excellent committee—to testify before our 

subcommittee today. And before we adjourn, I will ask Mr. Polls if 

he has any closing remarks. 

Mr. POLIS. Mr. Chair, I have an additional letter to submit to the 

record, without objection. 

Chairman ROE. Without objection, so ordered. 

[The information follows:] 

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Mr. POLIS. And I just want to thank Dr. Roe for holding this important hearing. I want to thank Chairman Kline for putting forward a discussion draft. Retirement security is incredibly important for our workers and, of course, for companies as well. We need 

to take the time to fully discuss how to ensure that employees’ benefits are protected and companies can remain competitive. 

I want to thank the witnesses for being here today. This is the 

start of a process of stakeholder input, and I greatly appreciate the 

time that all of you have taken to share your thoughts with us 

today on this topic. 

And I yield back. 

Chairman ROE. I thank Mr. Polis for yielding. 

And I again thank the panel for being here. 

And let me just close out by saying, in this country 29 percent 

of people over 55 have no retirement savings. That is a national 

tragedy when you think about it. I mean, none. I know when I 

began my small business over 35 years ago now, we had just 12 

employees. We now have 450 employees, which we have a 401(k). 

We have had a retirement plan from day one. As Mr. Green said, 

people have stayed with me for 40 years in our business. And actually, one outlasted me; she has still there working and will have 

a very substantial retirement benefit package when she leaves. 

And I am happy for that. I am glad about that. 

As Mr. Allen was saying, I started thinking about retiring when 

I started working, about how we provide for people who get up 

every day when they have a bad cold and they are feeling bad or 

whatever and come to work for me. They deserve a decent retirement. Mr. Chairman, you said that and I agree with you 100 percent. 

We have various options out there available to us. We have personal savings, we have a 401(k), IRAs, defined benefit plans. We 

have now this new hybrid plan called a composite plan, which is 

to me very intriguing. And when I was the mayor of Johnson City, 

Tennessee, I watched a defined benefit plan. When I began there 

in 2003, 11 percent of the total wages were used to make the accruals that we needed. Six years later, it was 19 percent. It was totally 

unsustainable for the taxpayers in that small community. We 

couldn’t continue to do that; there had to be other options available. 

And, as Mr. Green brought out, we are not going to attract companies to go into a defined benefit to sign onto a potential liability 

that exceeds the value of their business. I know I would never do 

that. You wouldn’t be a good business owner if you did. 

So I think you all have brought up, and I think what Mr. Courtney brought up is not altogether factual. I think the NCCMP’s initial shot at this 3 years ago was changed a lot by this. And I think 

the same thing, this is a hearing to begin the process, not the endpoint today. And we have heard a lot of good ideas. And certainly, 

I think Mr. Polis brought up harmful outcomes, and I think the 

harmful outcome is doing nothing. I think you will end up with a 

bad outcome if we do nothing. And I think this subcommittee and 

this committee and you as stakeholders out there won’t have done 

your job if we do nothing. 

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So I want to thank you again for the beginning of this process 

and I look forward to doing this. I am very intrigued by this and, 

with no further comments, this meeting is adjourned. 

[Additional submission by Ms. Bonamici follows:] 

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[Whereupon, at 11:34 a.m., the Subcommittee was adjourned.] 

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