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74–621 PDF 2012

ASSESSING THE CHALLENGES FACING 

MULTIEMPLOYER PENSION PLANS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH, 

EMPLOYMENT, LABOR AND PENSIONS 

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, DC, JUNE 20, 2012 

Serial No. 112–63 

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 
(II) 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN KLINE, Minnesota, Chairman 

Thomas E. Petri, Wisconsin 

Howard P. ‘‘Buck’’ McKeon, California 

Judy Biggert, Illinois 

Todd Russell Platts, Pennsylvania 

Joe Wilson, South Carolina 

Virginia Foxx, North Carolina 

Bob Goodlatte, Virginia 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Scott DesJarlais, Tennessee 

Richard L. Hanna, New York 

Todd Rokita, Indiana 

Larry Bucshon, Indiana 

Trey Gowdy, South Carolina 

Lou Barletta, Pennsylvania 

Kristi L. Noem, South Dakota 

Martha Roby, Alabama 

Joseph J. Heck, Nevada 

Dennis A. Ross, Florida 

Mike Kelly, Pennsylvania 

George Miller, California, 

Senior Democratic Member 

Dale E. Kildee, Michigan 

Robert E. Andrews, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Lynn C. Woolsey, California 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Dennis J. Kucinich, Ohio 

Rush D. Holt, New Jersey 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Timothy H. Bishop, New York 

David Loebsack, Iowa 

Mazie K. Hirono, Hawaii 

Jason Altmire, Pennsylvania 

Marcia L. Fudge, Ohio 

Barrett Karr, Staff Director 

Jody Calemine, Minority Staff Director 

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS 

DAVID P. ROE, Tennessee, Chairman 

Joe Wilson, South Carolina 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Scott DesJarlais, Tennessee 

Richard L. Hanna, New York 

Todd Rokita, Indiana 

Larry Bucshon, Indiana 

Lou Barletta, Pennsylvania 

Kristi L. Noem, South Dakota 

Martha Roby, Alabama 

Joseph J. Heck, Nevada 

Dennis A. Ross, Florida 

Robert E. Andrews, New Jersey 

Ranking Member 

Dennis J. Kucinich, Ohio 

David Loebsack, Iowa 

Dale E. Kildee, Michigan 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Rush D. Holt, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Jason Altmire, Pennsylvania 
(III) 

C O N T E N T S 

Page 

Hearing held on June 20, 2012 ............................................................................... 1 

Statement of Members: 

Andrews, Hon. Robert E., ranking member, Subcommittee on Health, 

Employment, Labor and Pensions ............................................................... 3 

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

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

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

Statement of Witnesses: 

Henderson, Scott, treasurer and vice president, the Kroger Co. .................. 32 

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

McReynolds, Judy, president and chief executive officer, Arkansas Best 

Corp. ............................................................................................................... 6 

Prepared statement of ............................................................................... 8 

Ring, John F., partner, Morgan, Lewis & Bockius LLP ................................ 19 

Prepared statement of ............................................................................... 22 

Sander, Michael M., administrative manager, Western Conference of 

Teamsters Pension Plan ............................................................................... 11 

Prepared statement of ............................................................................... 13 

Shapiro, Josh, deputy director for research and education, National Coordinating Committee for Multiemployer Plans ......................................... 14 

Prepared statement of ............................................................................... 16 

Additional Submissions: 

Mr. Andrews, letter, dated June 20, 2012, from Construction Employers 

for Responsible Pension Reform caucus ...................................................... 60 

Chairman Roe: 

Letter, dated July 3, 2012, from Construction Employers for Responsible Pension Reform caucus ................................................................. 58 

Prepared statement of the U.S. Chamber of Commerce ........................ 59 

(1) 

ASSESSING THE CHALLENGES FACING 

MULTIEMPLOYER PENSION PLANS 

Wednesday, June 20, 2012 

U.S. House of Representatives 

Subcommittee on Health, Employment, Labor and Pensions 

Committee on Education and the Workforce 

Washington, DC 

The subcommittee met, pursuant to call, at 10:01 a.m., in room 

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

of the subcommittee] presiding. 

Present: Representatives Roe, Wilson, Thompson, Rokita, 

Bucshon, Noem, Roby, Andrews, Kildee, McCarthy, Tierney, and 

Holt. 

Staff present: Andrew Banducci, Professional Staff Member; 

Katherine Bathgate, Deputy Press Secretary; Adam Bennot, Press 

Assistant; Casey Buboltz, Coalitions and Member Services Coordinator; Ed Gilroy, Director of Workforce Policy; Benjamin Hoog, 

Legislative Assistant; Marvin Kaplan, Workforce Policy Counsel; 

Brian Newell, Deputy Communications Director; Krisann Pearce, 

General Counsel; Molly McLaughlin Salmi, Deputy Director of 

Workforce Policy; Todd Spangler, Senior Health Policy Advisor; 

Linda Stevens, Chief Clerk/Assistant to the General Counsel; 

Alissa Strawcutter, Deputy Clerk; Kate Ahlgren, Minority Investigative Counsel; Aaron Albright, Minority Communications Director for Labor; Tylease Alli, Minority Clerk; Daniel Brown, Minority 

Policy Associate; John D’Elia, Minority Staff Assistant; Jonay Foster, Minority Fellow, Labor; Brian Levin, Minority New Media 

Press Assistant; Megan O’Reilly, Minority General Counsel; and 

Michele Varnhagen, Minority Chief Policy Advisor/Labor Policy Director. 

Chairman ROE. Call the meeting to order. A quorum being 

present, the Subcommittee on Health, Employment, Labor, and 

Pensions will come to order. 

Good morning, everyone. I would like to welcome our guests and 

thank our distinguished panel of witnesses for being with us today. 

In a recent editorial entitled the ‘‘Union Pension Bomb’’ the Wall 

Street Journal described the big trouble facing multiemployer pension plans. The editorial noted a study by the analystsat Credit 

Suisse which found multiemployer pension plans are collectively 

underfunded by approximately $369 billion and only a small fraction of these plans are considered stable and healthy. 
2 

It is important to note this study is based on a rate of return on 

investments not reflecting in—reflected in existing law. Some have 

argued the study makes assumptions that better reflect the current 

state of the multiemployer pension system and, as with any debate, 

others have disagreed. Regardless of the methodologies used, this 

is not the first time the challenges facing the multiemployer pension system have drawn the public’s attention. 

According to an analysis by the benefits consulting firm Segal, 

more than 25 percent of plans are in ‘‘critical status’’ due to severe 

financial deficiencies. A report by the Pension Benefit Guaranty 

Corporation revealed multiemployer pensions are increasingly dependent upon the agency’s financial assistance. In fact, the PBGC 

projects that its future obligations to these plans totals $4.5 billion, 

a 48 percent increase from previous estimates. 

The corporation also expects the number of insolvent plans to 

more than double over the next 5 years. Finally, there are warnings by plan managers and trustees who fear the pensions they 

oversee will become insolvent in the years ahead. 

While some plans have made responsible decisions to help ensure 

their long-term success, an aging workforce, weak economy, investment losses, and unsustainable promises are placing a great deal 

of strain on the multiemployer pension system. The resultant uncertainty is an ongoing source of angst for many workers and employers. 

Some workers have little confidence the benefits they were promised will be there when they retire. And employers trying to keep 

their businesses open are also trying to keep up with their growing 

pension obligations. 

Policymakers continue to struggle with this pension problem as 

well. In 1980 changes to federal pension law were adopted, including reforms that promote greater responsibility among employers 

and union officials for the promises they make to workers. More recently, the Pension Protection Act enhanced the accountability of 

the multiemployer pension system, establishing classifications to 

better identify a plan’s financial strengths and weaknesses and requiring more detailed disclosure of the plan’s financial status. 

Despite these well-intended efforts and past attempts to provide 

relief problems still exist. A number of provisions in existing law 

are set to expire in 2014, which means Congress will need to take 

action once again to help address the shortfalls of the multiemployer pension system. While some pension plans are financially 

sound and prepared to meet their obligations, it is becoming increasingly clear the depth and breadth of the challenges facing the 

system will demand significant reform. 

With a deadline of 2 years it may seem like time is on our side. 

However, we cannot ignore the impact this issue has right now on 

the health and strength of our nation’s economy. Thousand of jobcreators participate in the multiemployer pension system with 

more than 10 million Americans dependent on these benefits to 

help provide for financial security they deserve in retirement. We 

must use the months ahead to ensure we get this right. 

I look forward to today’s discussion and expect it will pave the 

way for future conversations on this very important subject. 
3 

I will now recognize my distinguished colleague, Mr. Rob Andrews, the senior Democratic member of the subcommittee, 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 

Good morning, everyone. I would like to welcome our guests and thank our distinguished panel of witnesses for being with us today. 

In a recent editorial entitled the ‘‘Union Pension Bomb,’’ the Wall Street Journal 

described the ‘‘big trouble’’ facing multiemployer pension plans. The editorial noted 

a study by analysts at Credit Suisse, which found multiemployer pensions are collectively underfunded by approximately $369 billion, and only a small fraction of 

these plans are considered stable and healthy. 

It is important to note this study is based on a rate of return on investments not 

reflected in existing law. Some have argued the study makes assumptions that better reflect the current state of the multiemployer pension system and, as with any 

debate, others have disagreed. Regardless of the methodologies used, this is not the 

first time the challenges facing the multiemployer pension system have drawn the 

public’s attention. 

According to an analysis by the benefits consulting firm Segal, more than 25 percent of plans are in ‘‘critical status,’’ due to severe financial deficiencies. A report 

by the Pension Benefit Guaranty Corporation reveals multiemployer pensions are 

increasingly dependent upon the agency’s financial assistance. In fact, PBGC 

projects that its future obligations to these plans total $4.5 billion—a 48 percent increase from previous estimates. The corporation also expects the number of insolvent plans to more than double over the next five years. Finally, there are the warnings by plan managers and trustees who fear the pensions they oversee will become 

insolvent in the years ahead. 

While some plans have made responsible decisions to help ensure their long-term 

success, an aging workforce, weak economy, investment losses, and unsustainable 

promises are placing a great deal of strain on the multiemployer pension system. 

The resultant uncertainty is an ongoing source of angst for many workers and employers. Some workers have little confidence the benefit they were promised will be 

there when they retire. And employers trying to keep their businesses open are also 

trying to keep up with their growing pension obligations. 

Policymakers continue to struggle with this pension problem as well. In 1980, 

changes to federal pension law were adopted, including reforms that promoted 

greater responsibility among employers and union officials for the promises they 

make to workers. More recently, the Pension Protection Act enhanced the accountability of the multiemployer pension system, establishing classifications to better 

identify a plan’s financial strengths and weaknesses and requiring more detailed 

disclosure of the plan’s financial status. 

Despite these well-intended efforts and past attempts to provide relief, problems 

still persist. A number of provisions in existing law are set to expire in 2014, which 

means Congress will need to take action once again to help address the shortfalls 

of the multiemployer pension system. While some pension plans are financially 

sound and prepared to meet their obligations, it is becoming increasingly clear the 

depth and breadth of the challenges facing the system will demand significant reform. 

With a deadline of two years, it may seem like time is on our side. However, we 

cannot ignore the impact this issue has right now on the health and strength of our 

nation’s economy. Thousands of job-creators participate in the multiemployer pension system and more than 10 million Americans depend on these benefits to help 

provide the financial security they deserve in retirement. We must use the months 

ahead to ensure we get this right. 

I look forward to today’s discussion, and expect it will pave the way to future conversations on this very important subject. I will now recognize my distinguished colleague Rob Andrews, the senior Democratic member of the subcommittee, for his 

opening remarks. 

Mr. ANDREWS. Thank you, Mr. Chairman. Good morning. I appreciate you calling this hearing and I appreciate the preparation 

of today’s witnesses. 
4 

One measure in Washington of how solvable a problem is is the 

attendance at the hearing, and the higher the attendance the less 

solvable the problem—— 

[Laughter.] 

And here is why: Many of our hearings—and it is true whether 

we are in the majority or the other side is in the majority—are 

rather contentious, where they are held to prove a political point, 

and everybody comes because everybody wants to get into the 

brawl. This is not a brawl this morning; this is a serious attempt 

at understanding a serious problem so we can work together to 

solve it, and I am sure that our colleagues on both sides will be 

actively engaged in helping to solve that problem. 

Here is the way I see the problem: It is the problem of a woman 

who runs a sheet metal contracting firm and has 21 employees, 

and she has been through really tough times the last 5 years as 

construction has slowed and in some cases ground to a halt. 

And she has got two problems here that the amount that she has 

to contribute to the pension fund in which she is a part keeps going 

up, which makes her less competitive to go get bids to build buildings or means that she has to pay lower wages to her present 

workers in order to do so—puts her in a real catch-22 situation. 

That problem worsens for her as other employers go out of business 

or leave the plan because every time one of them does the burden 

on her gets higher and more difficult to bear, and if she thinks 

about reducing her liabilities by leaving the plan it may put her 

out of business because the withdraw liability is so high. 

So this is about that small business person that builds hospitals, 

and builds schools, and builds stores around the country who is in 

real trouble to begin with, and this problem makes trouble worse. 

Problem is also, you know, about a 68-year-old iron worker who 

thinks that he is going to get a certain pension for as long as he 

lives. And we are here to do everything we can to make sure that 

that promise to him is kept, because he held up his end of the bargain. He went to work; he did his job well; he paid into the fund; 

he, you know, participated in collective bargaining agreements 

where he gave something up to get that pension. 

And then the third person I think about this morning is the taxpayer of the United States of America, that although the demands 

of multiemployer funds on the Pension Benefit Guaranty Corporation are qualitatively smaller than those of single employer plans 

simply because there are so many other guarantors. Unlike a single 

employer plan, where all that stands between the employer and the 

taxpayer is the PBGC, the multi plans there is another layer of 

protection for the taxpayer and it is that small businesswoman I 

just talked about running the sheet metal contracting firm. 

So those are the three people that I am worried about this morning. And I think this is a problem with a solution. These plans, depending upon how you measure their projected returns, are anywhere from 52 percent funded to something quite a bit higher than 

that, but they still have some trouble and the trouble really comes 

from two sources. 

The first is the same economic downturn that everybody else 

went through—you know, the equity investments weren’t worth as 

much as they were supposed to be and the money people thought 
5 

they had in their fund they didn’t have. I think we have all been 

through that as individuals and families as well as businesses. 

But the second problem that the multis have that is unique to 

the multis is the problem the E.U. is having this morning, which 

is, to make a decision you need a lot of people to vote ‘‘yes.’’ So you 

see, when Honeywell or General Motors has a problem the board 

of directors makes a decision, and they fix their plan one way or 

the other, and off they go. But when the Western States Conference has a problem, or the Central Pennsylvania Fund has a 

problem, or the Sheet Metal Contractors Fund has a problem, they 

got a lot of people who have a voice in that decision. They have a 

collectively bargained agreement and they have a—their word 

‘‘multi’’ means they have a multitude of employers who get a vote. 

So I am not suggesting that that governance model doesn’t work. 

I would suggest exactly the opposite. I think it works quite well, 

and I think that the multiemployer funds are an example of voluntary labor management cooperation that works very well in this 

country. 

But the fact of the matter is, when you have to have a lot of people agree on something it is a lot harder than when you only have 

to have a few. And so the multis are in a situation where they have 

suffered the same kind of economic harm that everybody else has 

in the 2008 meltdown, but making hard decisions about restructuring benefits or restructuring contributions are much harder to 

make when you are in that format where a lot of people have to 

make a decision. 

So I see our goal as considering ways that we can create or enhance a set of rules that make it possible for the trustees who run 

the multiemployer funds to make the decisions they need to make 

to make the funds stronger. Notice I said ‘‘for them to make the 

decisions.’’ I am not in favor of us supplanting their judgment with 

ours; I am not in favor of the Department of Labor or the PBGC 

or this committee micromanaging those funds. 

What I am in favor is creating an environment with the proper 

incentives and disincentives where the trustees of the multiemployer funds will have a better environment in which to make decisions that help the lady running the sheet metal contracting firm, 

the retired iron worker, and the taxpayer of the United States. 

I am confident we can work together, Mr. Chairman, and get 

that done. I look forward to hearing from the witnesses this morning. 

Chairman ROE. Thank the ranking member, and I suspect that 

you are right. The temperature in this room will be a lot lower 

than it is outside today, so—pursuant to Committee Rule 7(c), all 

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 such statements and other extraneous material referenced during the hearing 

to be submitted for the official hearing record. 

I will now introduce the witnesses. And this is a very distinguished panel. 

I have read all of your testimony and it—as I said, it laid out 

the problem very well, just not the solution. So I appreciate you 

doing that. 
6 

Ms. Judy R. McReynolds is the president and CEO of Arkansas 

Best Corporation in Fort Smith, Arkansas. 

Welcome. 

Mr. Michael Sander is the administrative manager of Western 

Conference of the Teamsters Pension Trust in Seattle, Washington. 

Welcome. 

Josh Shapiro is the deputy executive director for research and 

education at the National Coordinating Committee for Multiemployer Plans in Washington, D.C. 

Welcome, Mr. Shapiro. 

John F. Ring is a partner with Morgan, Lewis, and Bockius LLP 

in Washington, D.C. 

Welcome. 

And Scott M. Henderson is the vice president and treasurer of 

the Kroger Company in Cincinnati, Ohio. 

And before I recognize you to provide your testimony let me 

briefly explain our lighting system. You have 5 minutes to present 

your testimony and when you begin the light in front of you will 

turn green. With 1 minute left the light will turn yellow; and when 

your time is expired the light will turn red, at which point I will 

ask you to wrap up your remarks. I won’t cut you off in mid-sentence, but just wrap up your thoughts. 

And after everyone has testified members will have 5 minutes to 

ask questions. And I now will begin. 

I want to thank the witnesses and begin with Ms. McReynolds. 

STATEMENT OF JUDY R. MCREYNOLDS, PRESIDENT & CEO, 

ARKANSAS BEST CORP. 

Ms. MCREYNOLDS. Chairman Roe, Ranking Member, and distinguished members of the subcommittee, thank you for the opportunity to testify regarding the impact of multiemployer pension 

plan obligations on the trucking industry. 

I am the president and chief executive officer of Arkansas Best 

Corporation. Our largest operating subsidiary, ABF Freight System, is based in Fort Smith, Arkansas, and has been in continuous 

operation since 1923. We are one of the largest less-than-truckload 

carriers in North America and have more than 10,000 employees 

throughout the United States, Canada, Puerto Rico, and Mexico. 

ABF has traditionally been profitable but was hit hard by the 

economic downturn that began in 2007. The biggest challenge to 

ABF’s long-term viability is its multiemployer pension plan obligations. Unless the Congress acts, the ever increasing contribution 

obligations to these plans will cause more trucking company bankruptcies and the PBGC will ultimately have to take over the funding of many plans. 

ABF contributes to 25 separate multiemployer pension plans associated with the trucking industry. Many of the plans serving our 

industry are either already close to insolvency or clearly headed in 

that direction. 

The plans are independent of both the employers and the union. 

The plan trustees, half of whom are appointed by the employers, 

are ERISA fiduciaries who are required to act solely in the interest 

of the plan participants. If a multiemployer plan becomes insolvent 
7 

the PBGC is responsible for providing the assets to pay these benefits. 

Contributions to multiemployer pension plans by ABF and other 

employers have skyrocketed in recent years for a number of reasons, two in particular. First, these plans were established prior to 

federal deregulation of the trucking industry in 1980. Deregulation 

caused a fundamental shift in the economics of the industry and 

thousands of trucking companies who were participants in the— 

these pension plans have gone out of business. Under the multiemployer system the remaining companies in the plan are effectively 

responsible for the continued funding of all benefits, even for individuals they never employed. 

Second, the Pension Protection Act of 2006 gives multiemployer 

plan trustees little flexibility to address changed circumstances. 

The act significantly increased required contributions to underfunded plans in the endangered yellow zone status and the critical 

red zone status, a situation exacerbated by historically low interest 

rates and investment losses due to the stock market crash in 2007 

and 2008. 

In 2011 ABF contributed $133 million to multiemployer plans. 

Approximately 62 percent of our current contributions are made to 

critical red zone plans, including Central States Pension Fund, and 

another 12 percent to yellow zone status plans. 

More than half of ABF’s contributions to Central States Pension 

Fund alone are used to fund benefits of retirees of bankrupt or 

defunct companies, so-called ‘‘orphan retirees.’’ Any other multiemployer plans that we contribute to also have large numbers of orphan retirees. 

Three-fourths of our employees are represented by the International Brotherhood of Teamsters and we are a party to the National Master Freight Agreement. That 5-year agreement expires 

March 31, 2013. In order to comply with the requirements of PPA 

applicable to red and yellow zone plans the agreement imposes a 

7 percent compound annual contribution increase on ABF, which 

results in a more than 40 percent increase during the 5-year term 

of the agreement from the already high levels previously in effect. 

AFB operates in a highly competitive industry that consists predominantly of nonunion freight transportation carriers with much 

lower pension benefit costs. ABF now contributes $10.17 an hour 

for pension benefits, 257 percent higher than those for average 

union employers in the United States. These contributions represent 21 percent of our total compensation costs, compared to less 

than 8 percent for the average union employer. 

It is much worse with respect to nonunion competitors. In 2011 

our average pension plan contribution for an operational employee 

was $17,392, compared to $1,131 per employee for our key nonunion competitors. Thus, our retirement plan contributions are 

1,437 percent higher than our nonunion competitors. 

Because of its higher pension costs a smaller portion of the market is available to ABF and our market share dropped from 5.5 

percent in 2004 to 4 percent in 2011, relative to our competition. 

ABF is working with a number of groups to formulate multiemployer pension plan reforms that make sense for plans, active and 

retired employees, and contributing employers. Further raising of 
8 

contribution rates will jeopardize the ability of employers to survive 

and continue contributing to the plans. Plans cannot survive without contributing employers, but plan trustees have few tools to 

make changes that are necessary for the long-term viability of the 

plans and their contributing employers. 

ABF strongly supports efforts to save the multiemployer pension 

plans that its active and retired employees depend on for their retirement income. By taking action now Congress can help avert a 

crisis that otherwise is almost certain to occur. 

And I would be pleased to answer any questions that the members of the subcommittee have today. Thanks. 

[The statement of Ms. McReynolds follows:] 

Prepared Statement of Judy McReynolds, President and 

Chief Executive Officer, Arkansas Best Corp. 

Chairman Roe and Ranking Member and distinguished members of the Subcommittee, thank you for the opportunity to testify regarding the impact of multiemployer pension plan obligations on the trucking industry. 

My name is Judy McReynolds and I am the President and Chief Executive Officer 

of Arkansas Best Corporation. I am here to discuss the pension challenges faced by 

our largest operating subsidiary, ABF Freight System, Inc. (ABF). ABF, which is 

based in Fort Smith, Arkansas, has been in continuous operation since 1923 and 

is one of the largest less than truckload (LTL) motor carriers in North America. 

ABF has more than 10,000 employees and provides interstate and intrastate direct 

service to more than 44,000 communities through 275 service centers in all 50 

states, Canada, Puerto Rico and Mexico. 

ABF is a model corporate citizen. We are consistently recognized for excellence in 

safety, security and loss prevention by the American Trucking Association. We have 

been named a ‘‘Best Company to Sell For’’ by Selling Power magazine for ten consecutive years. We have been a named ‘‘Top 125 Training Organization’’ by Training 

magazine for the last three years. In addition, we currently have three America’s 

Road Team Captains, and have had at least one driver representative on this team 

every year since the team was established in 1995. 

ABF has traditionally been profitable but was hit hard by the economic downturn 

that began in 2007. We are working our way back to profitability and last year reported a small positive operating income of $9.8 million on more than $1.9 billion 

of revenue. With an operating loss in the first quarter of 2012, ABF is not out of 

the woods, but we are making progress. Despite the importance of these cyclical economic factors, the biggest challenge to ABF’s long-term viability and its competitiveness within the trucking industry is the current and future liabilities it faces under 

many of the multiemployer pension plans to which it contributes. 

Multiemployer Pension Plans and the Trucking Industry 

ABF contributes to 25 multiemployer pension plans associated with the trucking 

industry. Many of these plans are in difficult financial straits. Multiemployer pension plans cover employees of different employers generally in the same industry 

and geographic area and are managed by a joint board of trustees, half of whom 

are appointed by the contributing employers and the other half by the labor union. 

The plans are independent of both the employers and the union. Neither collective 

bargaining party can exercise legal control over the plans. Rather, the trustees are 

fiduciaries who are required to act solely in the interest of the plan participants, 

and not in the interest of either the employers or the union. The Pension Benefit 

Guaranty Corporation (PBGC) insures benefits promised under these plans, up to 

a maximum guaranteed level set by law. If a multiemployer plan becomes insolvent, 

the PBGC is responsible for providing assets to pay these benefits. The plans pay 

annual premiums to the PBGC for this insurance coverage. 

Contributions to multiemployer pension plans by employers like ABF have skyrocketed in recent years for a number of reasons. First, these plans were established 

at a time when the trucking industry was heavily regulated by the federal government, which imposed barriers to entry and rate regulation. When the Congress deregulated the trucking industry in 1980, this caused a fundamental shift in the economics of the industry. Since then, the industry has become much more competitive 

and, as a result, thousands of trucking companies have gone out of business. Under 

the multiemployer system, due to changes implemented by the Employee Retire-
9 

1On the other hand, multiemployer plans that are less dependent on the trucking industry 

and have a more diverse base of contributing employers, such as the Western Conference of 

Teamsters Pension Fund, are in much stronger financial positions. 

ment Income Security Act of 1974, as amended (ERISA), the remaining companies 

in the plan are effectively responsible for the continued funding of all benefits under 

the plan, including benefits of participants formerly employed by bankrupt or 

defunct companies. This is a fundamental difference from single employer pension 

plans, where the employer is responsible only for the benefits it promised to its own 

employees. While the number of companies contributing to trucking industry multiemployer pension plans has been greatly reduced, the number of retirees who receive pension benefits has increased. Thus, an unsustainable demographic situation 

has developed where an ever-declining number of employers are responsible for 

funding the benefits of retirees with whom they have no connection. For example, 

ABF understands that more than 50 cents of every dollar that it contributes to the 

Central States, Southeast and Southwest Areas Pension Fund (the ‘‘Central States 

Pension Fund’’) goes to fund benefits of former employees of bankrupt or defunct 

trucking companies, so-called ‘‘orphan’’ participants.1

Second, ERISA imposes potentially catastrophic ‘‘withdrawal liability’’ on companies that withdraw from underfunded plans. When an employer withdraws from a 

multiemployer pension plan, it owes its proportional share of the plan’s unfunded 

vested benefits. Many withdrawals have occurred in the bankruptcy context, and 

plans typically collect only pennies on the dollar of the withdrawal liabilities owed 

by these bankrupt or defunct companies. For example, when Consolidated 

Freightways withdrew from the Central States Pension Fund following its bankruptcy in 2002, the Fund collected a small fraction of the nominal $318 million withdrawal liability. This shortfall ultimately must be funded by ABF and the other remaining employers. Withdrawal liability has also deterred new employers from contributing to the plans and investors from providing additional capital to multiemployer plan contributing employers. 

Third, the Pension Protection Act of 2006 (PPA) significantly increased required 

contributions to underfunded plans, particularly those in endangered (‘‘Yellow 

Zone’’) and critical (‘‘Red Zone’’) status. When the PPA was enacted, interest rates 

had not dropped to their current historically-low levels, and the stock market decline following Lehman Brothers’ bankruptcy had not occurred. In combination, 

those two events drove up the value of plans’ liabilities, while reducing the value 

of their assets. For example, UPS withdrew from the Central States Pension Fund 

at the end of 2007 and paid the Fund $6.1 billion in withdrawal liability. The 

Fund’s losses from the stock market decline in 2008 exceeded this payment from 

UPS. Unfortunately, the PPA gives multiemployer plan trustees little flexibility to 

address changed circumstances. 

ABF’s Multiemployer Plan Contributions 

Based on the most recent annual funding notices ABF has received from the multiemployer pension plans to which it contributes, approximately 62% of ABF’s contributions are made to plans that are in critical/Red Zone status (including the Central States Pension Fund). Close to half of ABF’s total contributions are made to 

the Central States Pension Fund. Plans in endangered/Yellow Zone status represent 

12% of ABF’s contributions. The remainder of ABF’s contributions are made to 

‘‘Green Zone’’ plans like the Western Conference of Teamsters Pension Fund. 

Approximately 75% of ABF’s workforce is represented by the International Brotherhood of Teamsters (IBT). ABF is a party to the National Master Freight Agreement (NMFA) with the IBT, and the current five-year agreement expires March 31, 

2013. In order to comply with the requirements of the PPA applicable to Red Zone 

and Yellow Zone plans, the current version of the NMFA has imposed a 7% annual, 

compound multiemployer pension plan contribution increase on ABF since it went 

into effect in 2008. Over the course of the five-year term of the current NMFA, that 

means a total compounded PPA-required contribution increase of more than 40% 

relative to the rate in effect before the NMFA became effective in 2008. ABF has 

contributed the following amounts to multiemployer pension plans in recent years: 

$104 million in 2009; $120 million in 2010; and $133 million in 2011. Those contributions alone represent almost 8% of ABF’s total revenues from those years. 

ABF’s Competitive Situation 

ABF operates in a highly competitive industry that consists predominantly of nonunion freight transportation motor carriers. ABF’s nonunion competitors have much 

lower employee benefit cost structures, and some carriers also have lower wage 

rates for their freight-handling and driving personnel. In addition, wage and benefit 
10 

concessions granted by the IBT to a key union competitor allow for a lower pension 

cost structure than that of ABF. During the recessionary economic conditions that 

began in 2007 and worsened in 2008, competitors with lower labor cost structures 

reduced freight rates, resulting in increased pricing competition in ABF’s primary 

market segment. 

Furthermore, ABF’s labor costs are strongly impacted by its contributions to multiemployer plans that are used to pay benefits to ‘‘orphan’’ retirees who were never 

employed by ABF. As noted above, more than half of ABF’s contributions to the 

Central States Pension Fund are used to fund benefits of retirees of companies that 

are no longer contributing employers. Many other multiemployer plans to which 

ABF contributes also have large numbers of orphan retirees. 

Contributions to multiemployer pension plans are the main cost item compromising ABF’s competitiveness. For example, according to an April 24, 2012 study 

prepared by Mercer/WRG’s Information Research Center, ABF’s contributions for 

pension benefits of $10.17 per hour worked are 257% higher than those for average 

union employers. Pension contributions represent almost 21% of ABF’s total compensation costs, compared to less than 8% for the average union employer. Not only 

are the levels higher for ABF, they are increasing more rapidly, with a growth rate 

of 8% per year since 2007 compared to 4.2% for the average union employer and 

2.9% for the average nonunion employer. If ABF’s current contribution levels were 

frozen at current levels, and contribution rates for average union employers grew 

at their current rate of approximately 4.2% annually, it would take more than 30 

years just for those contribution levels to match ABF’s current level. The comparable figure for the average nonunion employer is 88 years. 

The comparison is even worse with respect to ABF’s nonunion competitors. For 

2011, ABF’s average pension plan contribution for its operational employees was 

$17,392 per employee. The average retirement plan contribution by ABF’s key nonunion competitors was $1,131 per employee for that year. Thus, ABF’s 2011 per-employee pension costs were 1437% higher than those competitors, who are not responsible for funding legacy liabilities of retirees they never employed. 

Relative to its nonunion competitors, ABF had market share of around 5.5% in 

2004. That has dropped to below 4%. Unless multiemployer pension plan contribution obligations are brought under control, ABF will continue to lose market share. 

ABF’s significantly higher cost structure that results from the multiemployer pensions plans has been highlighted in numerous financial analysts’ reports and is reflected in the Company’s stock price. For example: 

‘‘[W]e see an above-peer cost structure keeping ABF from generating earnings 

based on what the market will offer. ABF has a higher cost structure than union 

and non-union peers, which could keep the company at a competitive disadvantage 

* * * an above-peer cost structure and persistent challenges in the core less-thantruckload business present meaningful long-term risks.’’ Anthony Gallo, Senior Analyst, Wells Fargo 

‘‘We believe better relative tonnage levels will not solve the problem of [ABF’s] 

reduced profitability. It appears that a structural change in compensation and benefits to its Teamster workforce is necessary to better align costs with volumes * * * 

without material progress [on compensation issues] Arkansas Best has structurally 

higher costs than its peers stunting potential growth.’’ Chris Wetherbee, Research 

Analyst, Citi 

‘‘The most prevalent risks, in our opinion, to the performance of ABFS’ shares are 

the cyclical nature of LTL freight and legacy cost headwinds from its unionized 

workforce. Additional risks include the presence of well-capitalized integrated carriers (FedEx and UPS) in the LTL market and uncertainty surrounding multi-employer pension liabilities.’’ Todd Fowler, Vice President, KeyBanc Capital Markets 

ABF’s stock traded at $12.29 on June 15, 2012. The 52-week high as of that date 

was $27.44, more than double the current price. Before the 2008 financial crisis, 

ABF’s stock price exceeded $45 per share. 

If pension obligations are ignored, ABF’s cost structure is in line with that of its 

key competitors. It is ABF’s multiemployer pension obligations that require it to 

charge prices that its competitors are able to undercut. This creates a vicious cycle, 

where higher prices result in reduced market share, revenues drop, and ABF’s ability to invest in its business are jeopardized. 

A solution to the multiemployer pension plan crisis is critical for ABF and other 

trucking companies. 

Conclusion 

ABF is working with a number of groups to formulate multiemployer pension plan 

reforms that make sense for plans, active and retired employees, and contributing 

employers. Many multiemployer plans are in an untenable situation. Further rais-
11 

ing of contribution rates will jeopardize the ability of employers to survive and continue contributing to the plans. The PPA restrains plans’ abilities to accept reduced 

contribution rates for employers in financial distress. Plans cannot survive without 

contributing employers, but current legal rules make it difficult for plans to make 

changes that are necessary for the long-term viability of the plans and their contributing employers. Plan trustees currently have few tools to address the structural 

problems faced by the plans and the employers on which they depend. ABF strongly 

supports efforts to save the multiemployer pension plans that its active and retired 

employees depend on for their retirement income. 

In addition, action is required because the PBGC lacks the resources to fulfill the 

multiemployer plan obligations it expects to incur under current law. In its 2011 

annual report, the PBGC noted that the financial deficit of its multiemployer program doubled in its most recently-completed fiscal year. The PBGC further stated 

that ‘‘the greater challenge, however, comes from those plans that have not yet 

failed: our estimate of our reasonably possible obligations (obligations to participants), described in our financial statements, increased to $23 billion.’’ Without sufficient contributing employers, plans will eventually become insolvent and the 

PBGC will have to assume responsibility for the benefits under those plans. Currently, all of the PBGC’s multiemployer program revenues come from premiums 

charged to multiemployer plans themselves. However, if the PBGC cannot fulfill its 

benefit guarantee obligations, there will be great pressure on the federal government to provide additional funding to the PBGC from general revenues. By taking 

action now, Congress can help avert a crisis that otherwise is almost certain to 

occur. 

I would be pleased to answer any questions that the members of the Subcommittee may have. Thank you. 

Chairman ROE. Thank you. 

Mr. Sander? 

STATEMENT OF MICHAEL SANDER, ADMINISTRATIVE MANAGER, WESTERN CONFERENCE OF TEAMSTERS PENSION 

TRUST 

Mr. SANDER. Chairman Roe, Ranking Member Andrews, and 

members of the subcommittee, thank you for inviting me to testify 

today about the Western Conference of Teamsters Pension Plan. 

My name is Mike Sander. I am the administrative manager of the 

plan. 

The Western Conference Plan, the largest multiemployer plan in 

the country, provides secure retirement benefits to over 500,000 active and inactive vested employees and retirees. Since 1955 we 

have provided retirement benefits to over 300,000 additional retirees and their families. 

Plan assets today exceed $30 billion. Annual employer contributions total $1.3 billion. Last year we paid $2.2 billion in benefits 

to plan participants in all 50 states. 

Almost 1,700 employers engaged in over 50 different industries 

participate in our plan. We continue to add new employers and employee groups. These large and small employers are engaged in a 

variety of industries: grocery, food distribution, package delivery, 

manufacturing, beverage bottling, law enforcement, waste disposal, 

health care, and many others. 

Some are brand names: United Parcel Service, Safeway, CocaCola, Waste Management. But others are small businesses, like 

W.W. Clyde and Company, in Orem, Utah; McGree Contracting 

Company in Butte, Montana; and Whitewater Building Materials 

in Grand Junction, Colorado. 
12 

Over 74 percent of employers that participate in the Western 

Conference Plan are small businesses with 50 or fewer employees. 

In fact, nearly half have 20 or fewer employees. 

The Western Conference Plan is designed to accommodate a mobile workforce. A recent analysis of our active workers reveals that 

over 25 percent of participants over the course of their career have 

worked for two or more contributing employers to the plan. Participants work in a host of occupations, including truck drivers, 

nurses, clerks, warehouse workers, food processors, police officers, 

highway maintenance workers, construction workers, and others. 

The plan distributes a specified, regular amount of funds to retirees, determined by historical employer contribution rates, ages, 

lengths of service, and other factors. Because retirees are guaranteed a fixed level of retirement income the plan provides certainty 

and stability to retirees even in unpredictable economic times. The 

plan limits risks to both participants and employers by pooling contributions from a variety of companies and industries. 

Our goal is full funding. The trustees have always used a conservative investment strategy and benefit plan design. The plan 

has been in the green zone, as that term is defined by the Pension 

Protection Act, since the law was first passed in 2006. At the start 

of 2008, just before the market crash, our plan’s funded percentage 

was a robust 97.1 percent. 

The plan’s management and labor trustees have a long history 

of working together to strengthen the plan and promote the wellbeing of plan participants. After the dot-com market slide in 2002 

the trustees agreed to cut future benefits in half in order to get 

back to full funding. 

Like all institutional investors, the Western Conference Plan was 

harmed by the unprecedented collapse of the markets worldwide in 

2008. Our asset values dropped by 20 percent, over $6.2 billion. 

Congress passed common sense legislation in 2010 to allow plans 

to spread these losses over a longer period of time. The plans funded status for 2012 is now projected to be 90.3 percent. 

The Western Conference Plan strongly supports transparency. 

Financial information about the plan, including our audited financial statements, our Form 5500s, actuarial reports, annual funding 

notices, and other documents are all readily available for all to see. 

We encourage employers, participants, and other stakeholders to 

review our financial data on our Web site. 

The trustees strive to maximize operational efficiencies. Through 

investments in technology and a streamlined processing system 

computers now automate much of daily processing. 

Employers can report their monthly hours activity over the Internet and send their contributions electronically to a clearinghouse 

where available funds are swept immediately into the plan’s investment pools. The plan uses only seven cents of every contribution 

dollar to fund all plan operations, leaving 93 cents of contributions 

and 100 percent of investment income to support funding levels. 

Thank you for your consideration of our views. The Western Conference Plan is a long-term enterprise. We have been successful for 

over 50 years and we intend to provide substantial retirement security for the next 50 years and beyond. 
13 

We look forward to working with you and I would be happy to 

answer your questions. 

[The statement of Mr. Sander follows:] 

Prepared Statement of Michael M. Sander, Administrative Manager, 

Western Conference of Teamsters Pension Plan 

Chairman Roe, Ranking Member Andrews, and Members of the Subcommittee, 

thank you for inviting me to testify today about the Western Conference of Teamsters Pension Plan. My name is Mike Sander, and I am the Administrative Manager 

of the Plan. 

The Western Conference Plan, the largest multiemployer pension plan in the 

country, provides secure retirement benefits to over 500,000 active and inactive 

vested employees and retirees. Over the life of the Plan since 1955, we have provided retirement benefits to over 300,000 additional retirees and their families. The 

Plan covers the 13 western states—Alaska, Arizona, California, Colorado, Hawaii, 

Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming. 

Plan assets exceed $30 billion, and annual employer contributions total $1.3 billion. 

Last year, we paid $2.2 billion in benefits to plan participants in all 50 states and 

the District of Columbia. 

Almost 1,700 employers, engaged in over 50 different industries, participate in the 

Plan. We continue to add new employers and employee groups. These large and 

small employers are engaged in a variety of industries: grocery and food distribution, package delivery, manufacturing, clerical, beverage bottling, law enforcement, 

entertainment, waste disposal, health care and others. Some of them will be familiar 

to you: United Parcel Service, Safeway, Coca-Cola, and Waste Management. Others 

are not household names because they are small businesses, like W.W. Clyde & 

Company in Orem, Utah, McGree Contracting Company in Butte, Montana, and 

Whitewater Building Materials in Grand Junction, Colorado. Over 74 percent of employers that participate in the Western Conference are small businesses with 50 or 

fewer employees. 

The Western Conference Plan is designed to accommodate a mobile workforce, 

providing pension portability to participants who may find it necessary to seek employment in a different industry or elsewhere in the 13 western states, or even beyond. A recent analysis of our active workers reveals that over 25% of participants 

over the course of their career have worked for two or more contributing employers. 

Participants work in a host of occupations, including as truck drivers, nurses, clerks, 

warehouse workers, food processors, police officers, highway maintenance workers, 

and construction workers. 

The Western Conference Plan distributes a specified, regular amount of funds to 

retirees, determined by historical employer contribution rates, age, length of service, 

and other factors. Because retirees are guaranteed a certain level of retirement income, the Plan provides certainty and stability to retirees, even in unpredictable 

economic times. The Plan limits risk to both participants and employers by pooling 

contributions from a variety of companies and industries. 

Our Plan’s goal is full funding. The trustees have always used a conservative investment strategy and benefit plan design. The Plan has been in the ‘‘green zone,’’ 

as defined by the Pension Protection Act, since that law was passed in 2006. At the 

start of 2008, just before the market crash, the Plan’s funded percentage was a robust 97.1%. 

The Plan’s management and labor trustees have a long history of working together to strengthen the plan and promote the well-being of participants. The trustees take their responsibilities for funding very seriously. After the dot-com market 

drop in 2002, for example, the trustees agreed to cut benefit accruals by one-half 

to get back to full funding. Over the many decades the Plan has operated, the management and labor trustees have worked well together, resolving differences through 

a rational decision-making process focused on how best to achieve the key objective 

of providing retirement security to the hundreds of thousands of employees who participate in the Plan. 

Like all institutional investors, the Western Conference Plan was harmed by the 

unprecedented collapse of the markets worldwide in 2008. Our asset values dropped 

by 20%, over $6.2 billion. Congress passed common sense legislation in 2010 to 

allow plans to spread those losses over a longer period of time. These important 

changes came at no cost to taxpayers or the government. Despite the 2008 crash, 

the Western Conference Plan’s funded status for 2012 is projected to be 90.3%. 

The Western Conference Plan strongly supports transparency. Financial information about the Plan, including our audited financial statements, Form 5500s, actu-
14 

arial reports, annual funding notices, and other documents, is readily available for 

all to see. We encourage employers, participants and others to review our financial 

data at http://www.wctpension.org./downloads/downloads.html. 

The trustees strive to maximize operational efficiencies. Through investments in 

technology and a streamlined processing system, computers now automate much of 

daily processing. Employers can report their monthly hours activity over the internet and send their contributions electronically to a clearing house where available 

funds are swept daily into investment vehicles. The Plan uses only seven cents of 

every contribution dollar to fund all Plan operations, leaving 93 cents of contributions and 100% of the investment income to support funding levels. 

Since 1995, the Plan has provided an annual personal benefit statement to each 

active participant. The statement shows the participant’s total accrued benefits and 

the amount earned in the previous year, an itemization of hours worked and employer contributions for that year, and beneficiary information. This gives participants an important retirement planning tool. 

The Plan investments are made in accordance with an asset allocation model designed to provide strong returns consistent with a variety of economic environments. 

The Trust uses indexing strategies to provide effective diversification within the 

portfolios, while keeping net investment costs low. The Plan leverages its asset size 

into advantageous pricing. Manager selection is done with an eye to proven longterm results. Strong returns from proven asset managers at low net cost supports 

the highest benefit levels prudently possible. 

Thank you for your consideration of our views. The Western Conference Plan is 

a long-term enterprise. We have been successful for over 50 years, and we intend 

to provide substantial retirement security for the next 50 years and beyond. We look 

forward to working with you, and I would be happy to answer your questions. 

Chairman ROE. Thank you, Mr. Sander. 

Mr. Shapiro? 

STATEMENT OF JOSH SHAPIRO, DEPUTY EXECUTIVE DIRECTOR FOR RESEARCH AND EDUCATION, NATIONAL COORDINATING COMMITTEE FOR MULTIEMPLOYER PLANS 

Mr. SHAPIRO. Chairman Roe, Ranking Member Andrews, and 

members of the subcommittee, it is an honor to speak with you 

today on this important topic. My name is Josh Shapiro and I am 

the deputy director of the National Coordinating Committee for 

Multiemployer Plans. 

Multiemployer pension plans provide vital retirement income security to millions of working-class Americans. By serving workers 

characterized by very small employers and mobile workforces these 

plans cover individuals who simply would not have access to quality retirement benefits without them. 

As we discuss the challenges facing multiemployer plans a few 

features of these plans are worth noting. The first is that each multiemployer plan is governed by a board of trustees that consists of 

equal representation from both management and labor. The contributions that companies make to these plans go into a trust fund 

that is managed by the board of trustees, and this trust fund operates independently of either bargaining party. 

There are currently approximately 1,450 multiemployer plans in 

the country covering approximately 10 million workers. The 

NCCMP has estimated that the aggregate assets held by these 

plans totals approximately $450 billion. 

As you all know, the 2008 financial crisis and ensuing recession 

have had devastating effects on many sectors of our economy. Multiemployer plans are no exception. These plans are active investors 

in the equity markets, and just as they experienced tremendous 

asset growth during the boom years of the 1990s they also experi-
15 

enced enormous declines in their asset holdings in recent years. 

What you may not know is that the tax code that was in existence 

in the 1990s did not allow these plans to store those asset gains 

as insurance against future losses. 

A unique feature of multiemployer plans is the fact that contributions to the plans are governed by collective bargaining agreements. Once those contributions are negotiated there is no simple 

way to stop or reduce them when the plan is overfunded. 

Additionally, in the late 1990s contributions to an overfunded 

multiemployer plan were not tax deductible to employers, and in 

many cases such contributions would trigger excise tax penalties. 

This unfortunate situation meant that as a practical matter many 

plans had no choice other than to raise their benefit levels in order 

to eliminate the overfunding and preserve the tax deductibility of 

contributions. This inability to hold those investment gains as insurance against future losses left multiemployer plans especially 

vulnerable to declines in capital markets. 

The 2008 stock market crash reduced the funded position of multiemployer plans by an average of approximately 30 percent. The 

average plan was 90 percent funded immediately prior to the crash. 

After the crash the contributions necessary to fund these plans in 

many instances more than tripled. 

The response of the multiemployer community to this crisis has 

been profound. Across all sectors employees have accepted lower 

wages and lower benefits while employers have had to make larger 

contributions during a historically difficult business climate. 

NCCMP data indicates that over 80 percent of multiemployer plans 

have taken one or more of these steps. 

While these responses have been painful they have been largely 

successful. Recent survey data indicates that well over 60 percent 

of multiemployer plans are now in the PPA—the Pension Protection Act—green zone, indicating a healthy funded position. 

While the news headlines will always focus on the small number 

of plans that are deeply troubled and may not be able to recover 

from the crisis, the fact is that the majority of plans will be able 

to fully recover and pay benefits to future generations of participants. 

However, this recovery has come at a steep price. Younger participants have had their faith in the system shaken as their contributions have risen and benefits have declined, while the sponsoring companies are concerned that they are effectively acting as 

insurers against the stock market. 

The NCCMP has convened a Retirement Security Review Commission consisting of both labor and management representatives 

whose mission is to study the situation facing the plans and to develop a comprehensive proposal for reform. The guiding principles 

of this commission are that employer financial risk must be mitigated while at the same time participant retirement income security must be preserved. 

During this time of great challenge it is tempting to conclude 

that the multiemployer pension system is broken and should be 

abandoned. It would be a great tragedy if this fate were to befall 

a system that has been so beneficial to so many millions of people 
16 

for so many decades. The system does not need to go away but it 

does need to evolve. 

I am confident that the upcoming recommendations of the 

NNCMP commission will provide a solid foundation for a retirement system that will meet the needs of both the companies that 

support the plans and the employers that participate in them. 

Thank you very much for your kind attention, and I sincerely 

look forward to working with you and your staff members in the 

coming months as you work to implement necessary reforms. 

[The statement of Mr. Shapiro follows:] 

Prepared Statement of Josh Shapiro, Deputy Director for Research and 

Education, National Coordinating Committee for Multiemployer Plans 

Chairman Roe, Ranking Member Andrews and Members of the Committee, it is 

an honor to speak with you today on this important topic. My name is Josh Shapiro. 

I am the Deputy Director of the National Coordinating Committee for Multiemployer Plans (the ‘‘NCCMP’’). The NCCMP is a non-partisan, non-profit advocacy 

corporation created in 1974 under Section 501(c)(4) of the Internal Revenue Code. 

It is the only organization created for the exclusive purpose of representing the interests of multiemployer plans, their participants and sponsoring organizations. In 

addition to my role at the NCCMP, I am also a Fellow of the Society of Actuaries, 

a Member of the American Academy of Actuaries, and an Enrolled Actuary under 

ERISA. I serve on the American Academy of Actuaries Pension Committee, and on 

its Multiemployer Subcommittee. 

The sponsors of multiemployer pension plans are predominately small businesses 

that operate in industries characterized by highly fluid employment patterns. For 

over 60 years multiemployer plans have made it possible for these companies to provide their employees with modest and reliable retirement income. Both the small 

size of the sponsoring employers and the mobility of their workforces make it impractical for them to achieve this objective with single-employer pension plans. For 

this reason, millions of middle class Americans have financial security in retirement 

that is entirely attributable to the existence of multiemployer pension plans. According to the 2011 PBGC Annual Report, there are currently approximately 1,450 multiemployer plans in the country covering over 10 million participants. While precise 

figures are difficult to obtain, the NCCMP has estimated that the aggregate assets 

held by these plans totals approximately $450 billion. 

Multiemployer plans are the product of collective bargaining between one or more 

unions and at least two unrelated employers. The collective bargaining process establishes the rate at which employers will contribute to the plan, frequently expressed as a dollar amount per hour of work. The contributions go into a trust fund 

that is independent of either bargaining party. By law, the trustees of this fund consist of equal representation from both management and labor. With input from their 

professional advisors, the trustees determine the benefit provisions of the pension 

plan, oversee the investment of the assets, and administer the collection of contributions and the payment of benefits. As trustees, the representatives of both sides of 

the bargaining table have fiduciary responsibility to manage the plan for the sole 

and exclusive benefit of the plan participants. 

While most often associated with the construction and trucking industries, multiemployer plans are pervasive throughout the economy including the agricultural; 

airline; automobile sales, service and distribution; building, office and professional 

services; chemical, paper and nuclear energy; entertainment; food production, distribution and retail sales; health care; hospitality; longshore; manufacturing; maritime; mining; retail, wholesale and department store; steel; and textile and apparel 

production industries. These plans provide coverage on a local, regional, or national 

basis, and cover populations that range from as small as a few hundred participants 

to as large as several hundred thousand participants. 

The Experience of Multiemployer Plans in the 1990’s 

Since the establishment of ERISA’s pre-funding requirements, multiemployer 

plans have typically been very well funded. This was especially true in the late 

1990’s when exceptionally strong stock market returns resulted in many plans having assets that were significantly larger than their liabilities. While on the surface 

this is a highly desirable result, it is ironic that this period actually set the stage 

for the challenges that the plans face today. To see why this is the case, it is first 
17 

necessary understand how actuaries calculate the funding needs of multiemployer 

plans through the use of long-term assumptions and methods. 

Long-term actuarial funding rests on the idea that the financial markets will experience periods of strong investment returns and periods of poor investment returns. The actuary determines the funding requirements using an assumed rate of 

return on plan assets that represents his or her best estimate of the long-term average, with the understanding that over short periods of time the assets may perform 

significantly better or worse than this average. The core idea is the notion that 

short-term fluctuations will tend to offset each other, and the plan can achieve stable long-term funding through the use of level and predictable contributions. In 

order for this funding approach to function properly, it is necessary for plans to 

maintain surplus positions during periods of unusually strong asset returns, as 

these surpluses will serve to offset the losses that the plans incur during periods 

of unusually poor returns. 

During the late 1990’s, very strong investment returns resulted in the majority 

of multiemployer plans having assets that exceeded their liabilities. While the longterm approach to funding dictates that plans need to preserve this overfunding to 

offset future investment losses, two unique features of multiemployer plans prevented them from remaining in a surplus position. The first of these features is the 

fact that contributions to multiemployer pension plans are specified in collective 

bargaining agreements. There is no simple mechanism for stopping or reducing 

these contributions when the plan is overfunded. The second unique feature of multiemployer plans is the fact that during the 1990’s, contributions to an overfunded 

multiemployer pension plan were not tax deductible to the employers. In many 

cases, not only would contributions to these plans have been non-deductible, they 

would also trigger excise tax penalties. 

The combination of these two features placed the trustees of multiemployer pension plans in a very difficult position. The employers were obligated by the collective 

bargaining agreements to contribute to the plans, but due to the overfunding of the 

plans, these contributions would not be tax deductible, and might trigger excise tax 

penalties. As a practical matter, the trustees had no choice but to raise the level 

of benefits that the plans provided so that the plan assets would no longer exceed 

the liabilities. Essentially, they were forced to spend the funding surpluses instead 

of being able to preserve them as insurance against a market downturn. The 

NCCMP has estimated that upwards of 70% of all multiemployer plans found themselves in this position leading up to the millennium. The Pension Protection Act of 

2006 (PPA) addressed this shortcoming in the tax code, but unfortunately this 

change was too late to help most plans. 

It is worth noting that the situation facing single-employer pension plans was 

very different. The most obvious difference was the fact that the sponsors of these 

plans had the option to simply stop contributing to the plans during periods of overfunding. Many plan sponsors took advantage of this option, and it was not uncommon for these companies to go ten or more years without making any contributions 

to the plans at all. At the same time, there was no need for these plans to raise 

their benefit levels to eliminate the overfunding, so many of them remained significantly overfunded year after year. Some observers have noted that single-employer 

plans have historically had higher funding levels than multiemployer plans. This observation is true, but most authors either miss, or choose to ignore, the fact that 

the ability of single-employer plans to effectively maintain a surplus position gave 

them an inherent funding advantage over multiemployer pension plans. 

Market Turmoil of the 2000’s 

Having been unable to maintain a surplus position during the late 1990’s, multiemployer pension plans were extremely vulnerable to the market turmoil that characterized the decade between 2000 and 2010. Despite the downturn that occurred 

in the years 2000 to 2003, by the beginning of 2008 multiemployer plans were very 

much back on track. NCCMP survey data indicates that at the beginning of that 

year, the average plan was approximately 90% funded. The Pension Protection Act 

of 2006 (PPA) established criteria for determining when a multiemployer plan 

should be considered in ‘endangered status’ or ‘critical status’. NCCMP survey data 

shows that at the beginning of 2008, only 9% of plans were considered to be ‘critical’, with an additional 15% classified as ‘endangered’. 

The 2008 financial market crash and ensuing recession had a profound impact on 

the funding position of multiemployer plans. The S&P 500 Index lost 37% that year, 

and the average multiemployer plan experienced a decline of approximately 30% in 

its funded level (determined using the market value of assets). For many plans with 

funding ratios of 90% or better prior to the crash, the level of contributions needed 

to responsibly fund the liabilities more than tripled. This situation placed enormous 
18 

burdens on companies that were already contending with a historically difficult economic climate in the years following the 2008 crisis. The recession also presented 

a separate challenge for he plans themselves, as they depend on employment levels 

to generate contribution income. As an analogy, the 2008 crash gave the plans a 

hole from which they need to dig out, and the subsequent recession substantially 

reduced the size of their shovel. 

It is critical to note that the funding challenges currently facing multiemployer 

plans are not the result of reckless investing, aggressive assumptions, or unreasonably large benefits. NCCMP survey data clearly documents this conclusion. This 

data indicated that at the beginning of 2008, the average multiemployer plan held 

approximately 57% of its assets in equities, 27% in bonds, 6% in real estate, and 

the remaining 10% spread across cash, hedge funds, private equity, and other investments. This asset mix is in line with the portfolios of pension funds in other 

sectors, and is also consistent with the strategy that investment professionals recommend to individuals who need to manage their own retirement savings through 

defined contribution plans. 

Regarding actuarial assumptions, the vast majority of multiemployer pension 

plans budget for average returns of 7.5% or less on their investments. This figure 

represents a reasonable estimate of the asset returns that are attainable to investors with very long-term time horizons. NCCMP survey data indicates that the median benefit that a multiemployer plan pays to a retiree is approximately $900 per 

month, which is just under $11,000 per year. As most retirees have been receiving 

their benefits for many years, a better measure of the benefits that the plans are 

currently promising is to look at the median amount paid to a recent retiree. This 

figure is approximately $1,400 per month, or just under $17,000 per year. By any 

measure, these are modest retirement benefits that, when combined with Social Security and personal savings, are just enough to allow retired participants to have 

a decent standard of living. 

The Road to Recovery 

When a multiemployer plan encounters adverse experience, the trustees and bargaining parties have two main tools at their disposal to improve the funded position 

of the plan. The first tool is to allocate additional contributions to the plan. When 

this tool is used, it has a direct effect on both the employees and the employers. 

For the employees, it serves to reduce their overall compensation, since absent the 

funding challenges of the pension plan, these dollars would have been available for 

other purposes. In fact, in many severely troubled plans employees have accepted 

reductions in their paycheck wages in order to allocate more money to the pension 

plan. For the employers the additional contributions make it more difficult for them 

to compete in the market place, often against competitors that have not chosen to 

provide comparable retirement benefits to their employees. NCCMP survey data indicates that more than 70% of multiemployer plans have responded to the 2008 

funding crisis with increased contributions. 

The second tool available for the purpose of improving the funded position of a 

multiemployer pension plan is to reduce the rate of future benefit accrual. This action has minimal immediate effect on the plan as it does not affect benefits that 

participants have already earned. What it does do is allow a larger portion of the 

ongoing contribution income to pay for the funding shortfall, as a lesser portion of 

these contributions is required to cover the cost of participants’ benefit growth. In 

contrast to the first tool that impacts both the employees and the employers, reducing the rate of benefit accrual only has a direct impact on the employees. NCCMP 

survey data indicates that approximately 40% of multiemployer plans have responded to their funding challenges by reducing the rate of benefit accrual. 

The actions that multiemployer boards of trustees and sponsoring employers have 

taken in response to the financial crisis have been difficult for all stakeholders. 

However, these actions have not only been necessary, they have been effective. 

While NCCMP survey data indicates that only 20% of plans were in the PPA ‘green 

zone’ immediately following the 2008 crash, current data indicates that this figure 

now exceeds 60%. An occasional, and particularly ill informed, criticism of multiemployer plans is that they have ignored their problems. Regardless of how someone 

feels about multiemployer pension plans, any thorough analysis of their recent history will demonstrate the commitment that both the employees and employers have 

to the plans, and the sacrifices they have made to support them. 

Despite the efforts of the sponsors to take the measures necessary for recovery, 

a small number of plans have suffered more damage than they will be able to endure. Primarily these plans come from industries in which economic shifts have 

greatly hindered their ability to raise the necessary contribution income. In particular, there are two specific very large plans that have suffered from the unin-
19 

tended consequences of unrelated public policy decisions. In one of these plans, the 

deregulation of the trucking industry in 1980 resulted in the decline and demise of 

virtually all of the major contributing commercial carriers. In the other plan, the 

Clean Air Act caused the cessation of a large portion of the bituminous coal mining 

industry that previously contributed to the plan, resulting in an active employee 

population that is a small fraction of the previous number. In both instances, the 

plans had managed to remain well funded until the unprecedented market collapse 

imposed irrevocable harm on the plans’ investments. While these two plans represent major challenges to the multiemployer community, and they are the subject 

of frequent media attention, their unique circumstances are not representative of 

the vast majority of multiemployer plans. 

NCCMP Retirement Security Review Commission 

The multiemployer funding provisions of the Pension Protection Act of 2006 (PPA) 

will sunset at the end of 2014. The challenges currently facing multiemployer plans 

make it clear that in order to survive and grow in the future, the system requires 

a greater degree of flexibility than is currently available. We have welcomed the interest shown by your Committee staff and that of the other Committees of jurisdiction, as well as the regulatory agencies in learning how PPA could be modified to 

better meet the needs of plan participants, sponsors and the plans themselves. In 

the course of reviewing proposals for modifications, we have come to the conclusion 

that now is an appropriate time to consider taking a more fundamental assessment 

of the rules governing the multiemployer defined benefit system. 

In order to ensure that the interests of all stakeholders are reflected in this evaluation, the NCCMP has convened a ‘‘Retirement Security Review Commission’’ comprised of representatives from over 40 labor and management groups from the industries which rely on multiemployer plans to provide retirement security to their 

workers. The group began its deliberations in August of 2011 and meets monthly 

to evaluate their collective experience with current laws and regulations and develop ideas for reform and improvement. 

The group has identified the following key objectives: 

• Ensure that any proposed changes to the law or regulations will allow the plans 

to continue to provide regular and reliable retirement income to participants. 

• Reduce the financial risks to employers so that these risks do not encourage 

companies to leave the system or prevent new companies from joining the system. 

The Commission has established an ambitious time table for its deliberations with 

a target of developing legislative recommendations later this summer. We look forward to keeping your Committee staff apprised of our progress, and to discussing 

our recommendations when they are available. We are confident that labor, management, and government will be able to work together to achieve the necessary enhancements that will enable multiemployer plans to survive and continue to provide 

affordable, reliable and secure retirement income to future generations of Americans. 

Chairman ROE. Thank you, Mr. Shapiro. 

Mr. Ring? 

STATEMENT OF JOHN F. RING, PARTNER, 

MORGAN, LEWIS & BOCKIUS LLP 

Mr. RING. Chairman Roe, Ranking Member Andrews, and members of the subcommittee, thank you for the opportunity to participate in this hearing today. I am a partner with the law firm of 

Morgan, Lewis, and Bockius, and as part of my practice I am—I 

serve as management co-counsel to a number of multiemployer 

pension plans, and our firm represents dozens of multiemployer 

plans in traditionally unionized industries. 

In addition, I have negotiated on behalf of employers numerous 

collective bargaining agreements which set for the terms of and 

companies—the terms of companies’ participation in and contributions to multiemployer plans. So I have had the benefit of seeing 

multiemployer plan issues both from the bargaining table and the 

trustees table. 
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For more than 50 years multiemployer plans have played an important role in the overall retirement scheme of this country. In 

many unionized industries they are the retirement system for millions of Americans. And while many of these plans may be in good 

shape, like Mr. Sanders, the—there are significant numbers that 

are not and they are headed towards insolvency. 

Before discussing the plans themselves I would like to briefly 

talk about the companies that contribute to these plans. There is 

a tendency to focus exclusively on the plans and their beneficiaries, 

but consideration also needs to be paid to the companies that participate in and pay for these multiemployer plans. Without them 

the plans would be history. And if the financial burden to sustain 

these plans becomes too great then we run the risk of even more 

employers who provide good jobs with good benefits going out of 

business. 

Unfortunately, the number of companies that contribute to these 

plans has dwindled significantly in the past several decades. This 

has resulted in an ever increasing and in some cases unsustainable 

burden on those companies that remain. 

In some industries, increasing employer contributions to multiemployer plans is simply not a viable option. In order to comply 

with requirements of current law some plans would require—or set 

employer contribution rates at upwards of $20 per hour. That is 

$20 per hour of each hour worked by their active employees. It is 

obviously unsustainable. 

So why, then, are some of the multiemployer plans in trouble 

now and how bad is it? I think boiled down to its simplest explanation the problem has been caused by a combination of four 

things: one, investment loss; two, rising liabilities due to low interest rates; three, serious demographic issues; and fourth, spiraling 

liabilities left by withdrawing employers. 

These four things have put some multiemployer plans on an irreversible path towards insolvency, and for some plans the collapse 

is closing in quickly and they are projected to run out of money 

within 5 years. 

Investment returns and interest rates over the last decade have 

ravaged most defined benefit pension plans, and multiemployer 

plans were no exception. I would point out that many of these 

plans now facing insolvency were in very good shape—some upwards of 100 percent funded—more than a decade ago. 

The economic downturn only exacerbated the significant demographic issues facing multiemployer plans. As the size of the country’s unionized workforce in a number of industries has shrunk and 

continues to do so the ratio of retirees to active participants also 

continues to grow greater. And many of these retirees worked for 

companies who are gone or have withdrawn and are no longer contributing. And as such, the benefits of these retirees must be paid 

for by the remaining employers. 

What this has meant is higher employer contributions, which 

further threaten the financial viability of these last remaining contributing employers, many of which are already struggling because 

of the economy and because of the significant cost disadvantages 

they face vis-a-vis their nonunion competition. It has become a vicious cycle. 
21 

Situations like the one playing out in the current Hostess bankruptcy will only make matters worse. There, the bankruptcy judge 

may allow that company to walk away from all of the multiemployer pension plans in which it previously contributed, and to do 

so with no withdraw liability. For a number of smaller bakery 

funds this will mean certain insolvency and will leave the remaining employers with substantial liability. 

So it is not a pretty picture for some of these multiemployer 

plans. And what is worse, for plans in critical status that have reduced future benefits to the maximum extent possible and have 

raised contributions to the maximum extent possible, there are 

simply no tools left that trustees can use to avoid the slide towards 

insolvency. And regrettably, there is nothing in the current law 

that gives responsible government agencies—the IRS, the PBGC, or 

the DOL—any ability to provide meaningful assistance to these 

plans prior to them running out of money. 

So looking forward what is the answer? With the sunset of the 

PPA provisions in 2014, failure to address the problem in a timely 

legislative solution will mean that these insolvent plans will end up 

at the PBGC sooner rather than later. That is the current law. 

This means that the status quo will result in the government taking on a portion of these liabilities when these plans become insolvent. 

Mr. Chairman, thank you for giving me the opportunity to testify 

and I look forward to answering any questions you may have. 

[The statement of Mr. Ring follows:] 
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Chairman ROE. Thank you, Mr. Ring. 

Mr. Henderson? 
32 

STATEMENT OF SCOTT M. HENDERSON, VICE PRESIDENT & 

TREASURER, THE KROGER CO. 

Mr. HENDERSON. Chairman Roe, Ranking Member Andrews, and 

members of the subcommittee, thank you for this opportunity to 

testify today. My name is Scott Henderson. I am vice president and 

treasurer of the Kroger Company. I have responsibility for Kroger’s 

pension investments and I serve as a trustee for one of the 33 multiemployer pension plans in which Kroger participates. 

Kroger is one of the largest retailers in the world, with total an- nual sales exceeding $90 billion. Kroger is also one of the largest 

unionized employers in the United States. Two-thirds of our 

339,000 associates are represented by labor unions. 

Kroger appreciates the funding discipline Congress imposed 

under the Pension Protection Act. We look forward to discussing 

ways to build upon those rules and ways Congress could make 

broader structural changes to the multiemployer system. 

Mr. Chairman, there are three points I would like to make today. 

My first point is to note that multiemployer plans are funded only 

by those employers that participate in these plans. That is why we 

often stress that this is an employer issue. 

It is sometimes believed that multiemployer plans are union pension plans and, hence, a union issue. While it is true that participants work under collective bargaining agreements, those who fund 

these plans are employers—businesses large and small—that employ millions of working Americans. As Congress considers legislation that would address multiemployer plans it is important to remember that a key objective is to help employers better manage 

their financial exposure to these plans. 

My second point relates to Kroger’s obligations to fund retirement benefits of workers and retirees who never worked for 

Kroger. Kroger has promised to fund the retirement benefits that 

our associates have earned and we have kept this promise. But 

Kroger, along with other employers that contribute to multiemployer plans, should not be forced to fund or guarantee the pension 

benefits of workers and retirees who never worked for us. 

Under the current system, employers that remain in a multiemployer plan are financially responsible for the unpaid obligations of 

an employer that leaves the plan without funding its pension promises. Even if an employer pays everything it owes before leaving a 

plan the remaining employers are still financially responsible for 

the pension benefits of the exiting employer. 

This shifting of liabilities to remaining contributing employers is 

referred to as the ‘‘last man standing rule.’’ In those plans where 

the employer base has considerable declined the liabilities being 

absorbed by remaining employers are placing an unfair burden on 

these employers. In Kroger’s case it is one of the main reasons why 

we could be required to contribute an additional $2.3 billion to fund 

pension benefits over the long term. 

This leads to my final point. The current multiemployer rules are 

ill-suited for today’s economy. The rules limit companies such as 

Kroger from taking steps that would strengthen these plans. 

Despite these limitations Kroger has been innovative and forward thinking in our approach to multiemployer funding issues. 

Case in point: In 2011 we addressed some of our exposure by nego-
33 

tiating with our union counterparts to merge four multiemployer 

plans into a single new plan. Kroger contributed $650 million to accelerate funding of the merged plan, which increased its funded 

percentage from 73 percent to 91 percent. These efforts have longterm benefits for both our shareholders and our retirees. 

While Kroger would like to be more proactive, the current rules 

limit our ability to take similar action with respect to other multiemployer plans. Admittedly, it is easy to identify problems with the 

current system. Coming up with workable and equitable ways to 

reform these rules, however, is difficult. 

But here are four broad concepts that Congress could consider: 

One, continue the funding discipline imposed in 2006 by requiring 

bargaining parties and trustees to establish benefits based on 

available contribution levels and to eliminate current underfunding 

over a reasonable period of time. Two, give plans and bargaining 

parties more tools to address the current underfunding situation. 

Three, encourage the consolidation of multiemployer plans. And 

four, make plan information more accessible and transparent to 

contributing employers and participants. 

In closing, employers compete for the talent we need by providing 

competitive compensation packages that include a reasonable retirement benefit for long service employees. We can best keep that 

commitment by remaining a financially strong and growing company. 

Mr. Chairman, we look forward to working with this subcommittee and hope that you will view Kroger as a resource as 

Congress takes on these complicated issues. Thank you for the opportunity to testify and I look forward to answering your questions. 

[The statement of Mr. Henderson follows:] 

Prepared Statement of Scott Henderson, Treasurer and 

Vice President, the Kroger Co. 

Thank you Chairman Roe, Ranking Member Andrews, and members of the Subcommittee for the opportunity to testify today. My name is Scott Henderson. I am 

the Vice President and Treasurer for The Kroger Co. (‘‘Kroger’’). I have responsibility for Kroger’s pension investments, and I serve as a Trustee for one of the 33 

multiemployer pension plans in which Kroger participates. 

I. About the Kroger Co. 

Kroger is one of the largest retailers in the world, operating 2,425 supermarkets, 

789 convenience stores, 337 fine jewelry stores and 37 food processing facilities. We 

have operations in more than 35 states and sales of more than $90 billion. Kroger’s 

net earnings margin is just over 1%, reflecting the highly competitive nature of the 

retail food industry. 

Kroger ranks 23rd on the list of Fortune 100 companies and has been recognized 

by Forbes as the most generous company in America. We support numerous charities and more than 30,000 schools and grassroots organizations in the communities 

it serves. Kroger contributes food and funds equal to 160 million meals each year 

through more than 80 Feeding America food bank partners. 

Kroger employs 339,000 associates. Approximately two-thirds of our associates are 

covered by roughly 300 collective bargaining agreements (‘‘CBAs’’), making Kroger 

one of the largest unionized employers in the United States. Kroger’s primary union 

is the United Food and Commercial Workers International Union (‘‘UFCW’’), which 

represents almost 96% of our unionized workforce. Kroger’s other unions include the 

Bakery, Confectionary, Tobacco, Grain Millers International Union (‘‘BCTGM’’), the 

International Brotherhood of Teamsters (‘‘IBT’’), the International Union of Operating Engineers (‘‘IUOE’’), the International Association of Machinists (‘‘IAM’’), the 

Service Employees International Union (‘‘SEIU’’), the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers Inter-
34 

national Union (‘‘USW’’), and the National Conference of Fireman & Oilers 

(‘‘NCFO’’). 

Kroger contributes to 33 multiemployer defined benefit pension plans. In 10 of 

these plans, we account for 5% or more of the plan’s total contributions. On average, 

Kroger contributes approximately $250 million per year to these plans. However, as 

described in greater detail below, Kroger could be required to contribute an additional $2.3 billion over the long-term (in addition to its contributions to cover current accruals) to fund pension benefits previously accrued under these plans. 

II. What is a multiemployer defined benefit pension plan? 

A. General Overview 

A multiemployer defined benefit pension plan is a retirement plan to which more 

than one employer contributes. These plans are jointly managed by a board of trustees and funded pursuant to a CBA. Multiemployer plans were designed to serve as 

retirement vehicles for smaller employers and employers with mobile workforces, 

where employment patterns prevented employees from accruing adequate retirement benefits under traditional defined benefit pension plan sponsored by a single 

company. In other words, multiemployer plans were established so that workers’ 

pensions could be portable as they moved from job-to-job within the same industry. 

Multiemployer plans are subject to the Labor Management Relations Act of 1947, 

otherwise known as the Taft-Hartley Act. These plans are also subject to the Employee Retirement Income Security Act of 1974 (‘‘ERISA’’) and the relevant provisions of the Internal Revenue Code of 1986. These plans are required to have equal 

employer and union representation on the governing board of trustees. In general, 

the bargaining parties (i.e., the employer and the union) negotiate the terms under 

which employer sponsors contribute to the multiemployer plan. The board of trustees determines the benefits to be provided by the plan, based on the level of plan 

contributions and actuarial assumptions. Although the trustees are selected by management and labor, they are required by law to act solely in the interests of plan 

participants. 

B. Withdrawal Liability 

Prior to the enactment of ERISA and the Multiemployer Pension Plan Amendments Act (‘‘MPPAA’’), an employer’s obligation to a multiemployer plan was generally limited to the contribution obligation established in its CBA. In other words, 

a contributing employer’s exposure to these plans was limited to the contribution 

it was required to make during the term of the CBA. Once it made the agreed-upon 

contribution, the employer had no further liability. Thus, if it terminated participation in a multiemployer plan following the expiration of its CBA, it did not have 

any further liability to the plan. 

In 1980, Congress enacted MPPAA. MPPAA was designed to address perceived 

problems with the multiemployer pension plan rules, including the possibility that 

an employer could terminate participation in a plan without having fully funded its 

share of plan benefits. 

MPPAA, in turn, strengthened the manner in which pension benefits were protected by requiring contributing employers that terminated their participation in a 

plan to make payments to cover their share of any unfunded benefits. This is known 

as ‘‘withdrawal liability.’’ 

C. ‘‘Last-Man Standing’’ Rule 

When a withdrawing employer fails to pay its portion of the plan’s unfunded liabilities—as is commonly the case with employers that become bankrupt or simply 

go out of business—responsibility for funding these unfunded liabilities is shifted to 

the remaining contributing employers. This is referred to as the ‘‘last-man standing’’ 

rule. 

Even in those cases where an employer exits a plan and fully pays its withdrawal 

liability, the remaining employers are still responsible for ensuring that there is 

adequate funding in the future to cover plan liabilities attributable to the exiting 

employer. Thus, if the plan has adverse investment experience, the remaining employers must ultimately fund the benefits of the workers and retirees of the withdrawn employer. For example, assume an employer leaves a plan and pays $100 

million in withdrawal liability (representing 100% of the amount it owes) but the 

plan suffers a 25% investment loss in the following year (as many plans did in 

2008). Unless the plan experiences future ‘‘excess’’ investment returns that make up 

the loss, the ‘‘last-man standing’’ rule requires the remaining employers to make up 

the $25 million shortfall. In other words, the remaining employers bear the investment (and mortality) risk for benefits attributable to the workers and retirees of the 
35 

employer that exited the plan (notwithstanding the fact that the employer paid its 

withdrawal liability). 

D. Implications of Withdrawal Liability and the ‘‘Last-Man Standing’’ Rule 

It is important to emphasize that the ‘‘last man standing’’ rule effectively saddles 

employers that remain in a multiemployer plan with potential liability for pension 

obligations of workers and retirees that never worked for the remaining employers, 

worked for a competitor of the employers, or who worked in a completely different 

industry than the employers. This shifting of risk to the remaining employers places 

an unfair burden on these employers, and depending on their financial condition, 

could threaten the continued viability of these companies. 

Not surprisingly, the ‘‘last-man standing’’ rule has effectively discouraged the 

entry of new employers into these plans. New employers do not want to join a multiemployer plan that could expose them to future withdrawal liability on benefits 

earned by employees of other employers, including benefits earned long before the 

new employer joined the plan. 

E. Multiemployer Plans and the Pension Benefit Guaranty Corporation 

Unlike single-employer defined benefit plans, the remaining employers in a multiemployer plan effectively guarantee plan benefits and the Pension Benefit Guaranty 

Corporation (‘‘PBGC’’) plays a secondary role. Thus, unlike troubled single-employer 

defined benefit pension plans—where the PBGC receives the plan’s assets, assumes 

the pension liabilities, and pays out benefits in the case of a distressed plan—in the 

case of a multiemployer plan, the PBGC loans money to the plan to pay benefits 

when the plan becomes insolvent. If this occurs, the pension payments must be reduced to the extent they exceed the PBGC statutory maximum. Currently, the maximum PBGC multiemployer guarantee is $12,870 per year for a retiree with 30 

years of service at normal retirement age. 

III. Kroger’s participation in multiemployer defined benefit plans 

Like many retail food employers, Kroger began participating in multiemployer 

plans in the 1960s—in an era during which its exposure to these plans was limited 

to the contribution it was required to make during the term of its CBAs. Thus, its 

decision to participate in these plans was made well before the transformational 

changes made by ERISA and MPPAA. 

Employers in the retail food industry operate distribution centers and food processing facilities and transport goods between these facilities and store locations. As 

a result of its transit operations, Kroger, like a number of food employers, became 

contributing employers to trucking industry multiemployer plans during the 

1960s—at a time when trucking companies dominated participation in these plans. 

As a result of the dramatic consolidation in the trucking industry since the 1980s, 

some of these plans have ceased to be trucking plans, and food and beverage employers—like Kroger—now represent the majority of contributing employers. 

The effects of the market consolidation in the retail food and trucking industry 

was keenly felt when the 2001 tech bubble burst. The combined effect of the market 

consolidation and those losses were exacerbated by the 2008 stock market crash. 

These market events, together with the dramatic consolidation that has occurred in 

the trucking and food industries and the structural problems inherent in the multiemployer rules that have discouraged new entrants into the plans, have led to the 

current funding concerns. 

As described in our annual report, Kroger could be required to make future contributions of an additional $2.3 billion (in addition to its contributions to cover current accruals) to fund previously accrued pension benefits under the multiemployer 

plans in which it participates. Approximately 70% of this exposure is attributable 

to five of these plans. Importantly, a large portion of the $2.3 billion that Kroger 

could have to contribute is attributable to workers and retirees who never worked 

for Kroger. 

IV. Kroger as an industry leader 

A. Kroger’s Proactive Actions to Address Underfunding 

Kroger has been innovative and forward-thinking in its approach to multiemployer pension funding issues. For example, in response to funding concerns, union 

and Kroger trustees have worked together to address the funding of the 11 multiemployer plans with a Kroger trustee through a combination of contribution increases 

and benefit adjustments. In addition, Kroger is a long-time proponent of multiemployer funding reform including increased transparency. Since 2005, Kroger has 

made disclosures in its Annual Report with respect to its participation in multiemployer plans, including the theoretical estimate of its aggregated exposure to the 
36 

underfunding in such multiemployer plans. Kroger supported the efforts of the Financial Accounting Standards Board for greater financial statement disclosure of 

multiemployer plan exposure. 

In 2011, Kroger acted to address underfunding of four UFCW multiemployer 

plans, in which it was effectively the ‘‘last man standing,’’ by negotiating the merger 

of these four plans into one, new plan. In this case, Kroger associates accounted for 

over 90% of the active participants in these plans (which covered almost 30% of 

Kroger’s represented workforce). Together, the four plans had a current market 

value funded ratio of about 73% and over $900 million of unfunded liabilities, about 

$200 million of which was attributable to workers and retirees who had never 

worked for Kroger (i.e., amounts that were shifted to Kroger on account of the ‘‘lastman standing’’ rule). 

As part of the merger, Kroger agreed to accelerate its share of funding to the plan 

and fund the liabilities attributable to workers and retirees of employers that previously exited the plans. Kroger also made a long-term commitment (until 2021) to 

a defined benefit plan that is designed to provide competitive retirement benefits 

for career Kroger associates covered by the new consolidated plan. In January, 2012, 

Kroger contributed $650 million to facilitate the merger of the four plans and to 

eliminate most of the current underfunding. As a result of this contribution, the new 

consolidated plan’s current market value funded ratio rose from approximately 73% 

to 91%. 

B. Structural Impediments Prevent Faster Funding of Underfunded Plans 

Notwithstanding these efforts, Kroger still faces significant exposure from underfunded plans, as do hundreds of other employers. The current funding structure of 

multiemployer plans discourages companies like Kroger from addressing those plans 

in which Kroger is not the dominant contributing employer. This is because the current funding rules effectively prevent employers like Kroger from eliminating their 

share of plan underfunding, unless the other contributing employers can be persuaded to take similar action (or the plan attempts to address the issue through 

special withdrawal liability rules and contribution agreements). 

For example, the actions Kroger took last year to address underfunding in four 

of its multiemployer plans would be difficult to replicate for plans in which Kroger 

is a significant, but not dominant, employer. Special contributions—such as the 

$650 million contribution Kroger made to the new consolidated plan—would improve the overall funding of the plan but would effectively benefit all contributing 

employers. However, unless other contributing employers can be persuaded to make 

special contributions, there is little reason for Kroger to unilaterally fund these 

plans. To illustrate, if Kroger is an equal participant in a multiemployer plan with 

four other employers, 80 cents of every additional dollar Kroger contributes towards 

the current underfunding would serve to reduce the overall plan liability of other 

contributing employers, and would actually increase Kroger’s share of the plan’s remaining unfunded benefits if Kroger were to withdraw. 

In the case of the new consolidated plan, Kroger took action only after concluding 

that because it was already the ‘‘last man standing,’’ the advantages of plan consolidation outweighed the cost of the additional contribution dollars. While special withdrawal liability rules and contribution agreements could be fashioned to encourage 

others contributors to follow Kroger’s example, these steps would have to be voluntarily adopted by the plan trustees and cannot completely address all of the impediments to accelerated funding under current law. Unless other contributing employers can be persuaded to make a similar contribution, the current system effectively 

discourages employers from committing significant dollars to address underfunding 

in these plans. 

V. Suggested concepts Congress may consider 

A. Continue Funding Discipline Inherent in PPA Rules 

The Pension Protection Act of 2006 (‘‘PPA’’) was designed to impose discipline on 

pension funds and bargaining parties to ensure that the bargaining parties and plan 

trustees acted responsibly and established reasonable benefit and contribution levels. The PPA also provided needed transparency for multiemployer plans. Prior to 

PPA, even large employers like Kroger had difficulty securing information about the 

plans to which they were contributing. Although the PPA included rules requiring 

funding discipline and additional transparency, it did not change the basic structure 

of the multiemployer pension plan rules (e.g., withdrawal liability or the ‘‘last-man 

standing’’ rule). 

The PPA rules applicable to multiemployer pension plans are scheduled to sunset 

at the end of 2014. Congress should act to continue the funding discipline imposed 

by the PPA by requiring bargaining parties and plan trustees to establish benefits 
37 

based on available contribution levels, and to eliminate current underfunding over 

a reasonable period of time. However, the tools currently available to plan trustees, 

employers and unions wishing to responsibly address plan underfunding issues have 

proven to be insufficient. The parties will need greater flexibility in order to develop 

and implement the necessary measures to address the underfunding issue in a mutually satisfactory manner. 

B. Greater Flexibility 

Multiemployer plans, labor unions and employers are working together to develop 

policy recommendations that would address the current underfunding of multiemployer plans. Because such a substantial proportion of our workforce relies on these 

plans to secure their retirement, and because Kroger has had to devote significant 

resources to fund the benefits of other workers in these plans, Kroger is deeply invested in finding a solution to these challenges. Kroger is committed to being part 

of the problem-solving process. 

What is clear is that multiemployer plans and bargaining parties must be provided with greater flexibility to address the underfunding situation. Given the 

unique circumstances of each plan, the parties should be afforded as much flexibility 

as possible. For example, the fortunes of some plans could be improved by encouraging consolidation as a means of promoting greater efficiencies and reducing expenses. 

Plan trustees, unions and employers should be encouraged to take responsible 

steps to place underfunded plans on solid footing. The parties need support and 

flexibility so they can determine the best course of action to improve their funding 

situation. There is no easy solution to this problem, and the way forward is unclear. 

But solutions exist, and by working together, we can secure the retirement benefits 

our employees are counting on. 

VI. Conclusion 

Kroger applauds this Subcommittee for its leadership in holding this hearing and 

beginning the process of addressing the structural problems facing the multiemployer system. We are grateful for the opportunity to tell our story, and we look forward to working with you, the multiemployer plans and labor on a solution that will 

ensure the continued viability of the multiemployer system. 

Chairman ROE. I thank the panel. As I said, you all laid out the 

problem very well. 

It is the solution that is going to be the problem, as you said, Mr. 

Henderson, and I want to tell you, you have my full attention, and 

that we will—that you have my promise to work with you all as 

best we can to help find some solutions here. 

So let me start by saying that I started out my career in a defined benefit program, and we changed to defined contribution program 25 years ago because we saw we couldn’t fund it. And I 

served on the pension committee in my practice, which has 100 

providers and 450 employees. So I do have some experience there. 

I was also mayor of our local city, and what I noticed was that 

we were—when I started in 2003 as a city commissioner we were 

paying 12 percent of payroll in retirement, and when I left in 2008 

it was up to 19 percent to come to Congress. And Ms. McReynolds 

has laid it out, and I want to start—we realized we could not continue that. The tax—future obligation to taxpayers was 

unsustainable. 

So now our city—actually two cities in my district—have changed 

to a defined contribution plan and capped those liabilities. So that 

may be something you have to look forward. I realize these are contractually done in a—in union contracts, and you have to—obviously to sustain those. 

Ms. McReynolds, I was fascinated by your comments and how 

much—$10.17 an hour in pension costs and $17,000—that is an astonishing amount of money, and quite frankly, it is to make up a 
38 

previous liability. If you put $17,000 per employee they would—everybody in your business would retire multiple wealthy. 

So how do we—I am going to start with you and then, Mr. Henderson, I want you to chime in, because you are out there trying 

right now to run your businesses and not go broke. So I am going 

to start with you. What suggestions do you have? And I heard Mr. 

Henderson’s four ways. 

Ms. MCREYNOLDS. Well, I think, you know, you heard a variety 

of comments, you know, across the witnesses that are testifying 

here today, Mr. Chairman, and, you know, I appreciate the perspective of others and other plans. You know, our specific issues relate to the trucking industry, and, you know, really what you had 

in 1980 when these rules came into place—you know, the deregulation of the industry and then the ERISA rules that caused us to 

have responsibility for employees who never worked for us, you 

know, the industry was much different. 

Over time we have had the failure of a number of companies that 

were former contributors to these plans, and the current situation 

is that we are acting as the PBGC for the trucking industry. Our 

primary solution, you know, needs to involve eliminating an obligation for orphaned retirees who never worked for our company. 

Chairman ROE. What percent of your—you may have said it; you 

had a lot—what percent of your contributions are for orphaned employees? 

Ms. MCREYNOLDS. We believe that it is between 40 and 50 percent. We know 50 percent of our contributions go to Central States. 

We have had factual information come from them that suggests 

that 50 percent of our payments are for orphaned retirees. The 

other funds have not given us the direct facts, but we believe 

across the board it is similar, so I would say between 40 and 50 

percent of what we pay—— 

Chairman ROE. Significant amount. 

Ms. MCREYNOLDS [continuing]. A significant amount. It is north 

of $60 million a year for people who never worked for our company. 

So our best solution is going to involve a solution for those retirees 

of defunct employers—— 

Chairman ROE. So here your business is. You are trying to compete in this market—— 

Ms. MCREYNOLDS. Right. 

Chairman ROE [continuing]. With a huge disadvantage financially to try to go out and get a contract. 

Ms. MCREYNOLDS. That is right. 

Chairman ROE. Mr. Henderson, I would like you to comment. 

Mr. HENDERSON. Well, to the last point, we also compete in a 

highly competitive industry and many of the new entrants in our 

industry are not—do not work under collective bargaining agreements, which adds additional pressure to our business. 

I guess the best way for me to answer that question is probably 

from my experience as a trustee on these multiemployer plans. 

First comment I would make is that I appreciated as a trustee the 

provisions of the Pension Protection Act. When a plan goes in the 

red zone status and that clock starts running it puts the necessary 

pressure on trustees to collectively cooperate and come up with solutions, which I think we have done. 
39 

And in the case that we are talking about here it is clear that 

the last man standing, or the implication of orphans, is a major 

problem in these plans, and in fact, in our case the four plans that 

we consolidated last—well, January 1st of this year, they collectively had approximately $3.5 billion worth of liability, and almost 

$1 billion of that liability came from orphans in those plans. 

Chairman ROE. My time is expired. 

I am going to ask a question later, Mr. Sander, why you believe 

that plan—your plan is financially solvent. You can’t answer it 

right now because my time is expired, but I am going to come back. 

Mr. Andrews? 

Mr. ANDREWS. Thank you. 

This is a refreshing panel because not only did you lay out the 

problem but many of you started to talk about the solution. I would 

like to follow up on that. 

Do we have a consensus here this morning that court decisions 

or law that would let companies walk away from their liability in 

bankruptcy—that is, discharge those liabilities in bankruptcies—is 

undesirable and should not be the law? Does everybody agree with 

that? 

Mr. SANDER. Think so. 

Mr. ANDREWS. You should not be able to discharge these departure liabilities in bankruptcy. Does anybody disagree with that? 

Okay. That doesn’t make the present problem any better but at 

least it keeps it from getting a lot worse. It would be catastrophically bad, in my opinion, if that happened. 

Number two: Mr. Shapiro outlined that we had 20 percent of the 

plans in the green zone I guess the beginning of 2009. That has 

migrated to about over 60. So something is working. 

Does everybody agree at least thematically that we should take 

the incentives in the 2006 law that helped make that happen and 

reconsider those and maybe strengthen them some? Everybody 

agree with that, at least conceptually? Okay. 

Here is the hard one: I think there are some plans for whom 

those incentives don’t work because they have a huge cash flow 

problem, and I think really that is what Ms. McReynolds is talking 

about. We could say that, you know, you have 2 years to get from 

red to yellow and 2 years to get from yellow to green and I think 

that might put your trucking company out of business, and it 

would hurt Krogers big time. 

So what we don’t want to do is kill the goose that is laying the 

golden egg. So I think there are some plans for which there is a 

cash flow problem here that the present contributors are just not 

going to be able to handle on their own. Does everybody agree with 

that presumption? 

Ms. MCREYNOLDS. Yes. 

Mr. ANDREWS. Okay. 

Would it help solve that cash flow problem if there were a credit 

facility available that would help the fund—in effect, literally put 

cash into the fund, borrow it, put it in, and amortize that cash over 

the future in order to reduce present contributions? Would that be 

a good thing? 

Yes. I don’t think your mike is—— 

Ms. MCREYNOLDS. Yes. I would like to speak to that. 
40 

The way that additional funding could help is if it does result in 

reduced contribution levels for employers. 

Mr. ANDREWS. Let’s say that—— 

Ms. MCREYNOLDS. I mean, you have to have the—— 

Mr. ANDREWS. Let’s say that we wrote a rule that said that is 

the only way you could borrow the money, that the only way that 

you could borrow it would be if the proceeds went exclusively to 

buy down the contribution for present employees—or employers, 

rather. Would that work? 

Ms. MCREYNOLDS. Again, if it resulted in us no longer having to 

bear the burden of employees that never worked for us—— 

Mr. ANDREWS. What would a—— 

Ms. MCREYNOLDS [continuing]. That would be a good—— 

Mr. ANDREWS. You have estimated that as maybe 40 percent of 

your contributions? 

Ms. MCREYNOLDS. Yes. 

Mr. ANDREWS. Let’s say purely hypothetically we were able to 

knock that 40 percent down to 10 by taking some of the pressure 

off in cash flow. What would that do for your trucking company? 

Ms. MCREYNOLDS. That would be a substantial improvement 

from where we are today. 

Mr. ANDREWS. What would that do for Krogers? 

Mr. HENDERSON. Well, in our case—the best example I suppose 

I can give is the consolidation that we achieved in late 2011. In the 

four plans that we consolidated those plans—we were the overwhelming contributor. We were, in fact, the last man standing. 

Under the rules of PPA all those plans were in the red zone, so 

we had enacted—the trustees had enacted certified rehabilitation 

plans. 

Mr. ANDREWS. Right. 

Mr. HENDERSON. And if you added them all together Kroger was, 

over the course of 7, 8, 9 years, largely responsible for funding all 

of the unfunded liability. Realizing we had that liability and realizing that as one of the last remaining conventional retailers—grocery retailers in the United States, given our strong balance sheet, 

we actually concluded that we could go to the regular capital markets and borrow money at a rate that was very favorable to us. 

Mr. ANDREWS. So I think we have a sort of three-tier issue here. 

We have got some plans like the ones that you are in, Mr. Henderson, where the capital markets, of their own volition, might put up 

some of that money. There would be a second tier where they 

wouldn’t but perhaps consideration of a—some guarantee would 

draw them into that marketplace. 

And there is a third level where they wouldn’t at all because they 

are in such trouble, and that suggests that we at least consider 

some kind of publicly provided credit facility that might get you out 

from under this. And I would just outline this as an analytical way 

of looking at this. 

I would also say this to you: I don’t think anybody should have— 

any plan should have access to either the guaranty facility or the 

direct loan facility unless it makes the kind of reforms that you are 

all talking about here, unless it maxes out internally on what it 

can do. But I think it might be a way to go after that group that 
41 

is the—that is really hurting and find a way to get them over the 

hump, and I would be interested in exploring that idea with you. 

Thank you. 

Chairman ROE. I thank the gentleman for yielding. 

Mr. Rokita? 

Mr. ROKITA. Thank you, Mr. Chairman. I would like to yield as 

much time as you would like to consume to you, sir, so you can follow up your questioning. 

Chairman ROE. Mr. Sander, obviously your—the plan you represent is relatively healthy, and obviously what would make all 

these plans relatively healthier would be about a 10 or a 15 percent 

improvement in the stock market, and interest rates changing 

would help a lot. 

But what is the difference between yours—I think I understand 

it, but for the record I want you to explain the difference between 

what Ms. McReynolds is experiencing and maybe Mr. Henderson, 

and what you have experienced. 

Mr. SANDER. Sure. First of all, I would like to thank Ms. 

McReynolds for the footnote in her testimony which referenced our 

plan and was very complimentary about the funding levels that our 

trustees have maintained. 

I really don’t have the experience or the knowledge to speak to 

other plans other than the Western Conference, but I can give you 

an idea about, having been in this position since 1992, the steps 

that our trustees have taken. Maintaining strong funding has always been the guiding principle of the Western Conference Plan, 

and the trustees have always, if you will, lived within their means 

when it came to using reasonable actuarial assumptions and investments assumptions and then structuring the plan of benefits so 

that if we received reasonable investment returns they were not 

going to be creating unfunded liability for employers. 

I think the other thing that is so critical is our trustees—labor 

and management, working together—have always made hard decisions about the structure of the plan when it was necessary. The 

dot-com bust, frankly, was a really difficult time for plans. Not as 

difficult as 2008, but difficult. And out trustees, actually at the 

union’s suggestion—union trustees’ suggestion—met and cut the 

accrual rate for future benefits, the earnings formula, proactively 

so that the plan could return back to full funding as quickly as possible. 

So that level of cooperation has always been a real trademark of 

the Western Conference Plan. 

We are fortunate to have a diversity of employer industries so 

that if, for instance, construction falls on hard times for a year or 

2 we will find another industry—food—that is very steady or is 

growing, and this has really provided a cushion for us and it is a 

real strength for our plan, and other plans lack it. And we have 

been very open with our employers; we are very open with the local 

unions. We are very, very transparent. 

We have always taken the position that we want to be the plan 

of choice. You mentioned, Mr. Chairman, your own personal experience. We have a lot of small employers in our plan. We have gone 

out, met with these employers at their request, we have said, 

‘‘Look, this defined benefit formula is the best place for your em-
42 

ployees to be. If you bargain this rate of contribution, we stay well 

funded, then that is all we are going to be asking of you. Pay it 

accurately, pay it timely, and we will take care, on the trustee end, 

of producing a good family of benefits for your employees.’’ And 

that has really worked successfully for us. 

Chairman ROE. I think one of the things that has happened is 

when the actuaries have assumed a 7 percent accrual rate, and 

that is just not—certainly in the last 10 to 12 years it hasn’t been. 

The 1990s, yes, but the last 10 or 12 years—now, Mr. Shapiro 

pointed out, I think, the perfect storm, when the—the 1990s, when 

things were going along just great, when you go over 100 percent 

funded then the employer was punished if they put more in, and 

that created a perfect storm where you couldn’t get it—there are 

going to be peaks and valleys and we haven’t rejected the economic 

cycle. It will go up again; it will go down again. So we have to be 

able to get through those times, and I think that is something I am 

going to look strongly at is to allow those deductibilities to go to 

be overfunded for a little while. I mean, some plans went years 

without putting any money in there. 

I am going to yield back to Mr. Rokita. I didn’t mean to use all 

of his time. 

Mr. ROKITA. Thank you, Mr. Chairman. 

Appreciate everyone’s testimony. 

Mr. Henderson, I particularly appreciate you being here. My father-in-law was a Kroger union truck driver for 30-some years, although I think I botched that number exactly. So really appreciate—I learned a lot through him and I learned a lot through all 

your testimony here today. 

If I can get this question in really quick to Mr. Ring, however: 

Your testimony painted a sober picture of the situation facing 

PBGC. Program has a deficit of $2.8 billion and you say it is reasonably possible that it will take an additional $23 billion in obligations to multiemployer plan participants. 

Can you explain how and when PBGC provides financial assistance to insolvent plans? 

Mr. RING. Yes. As a plan becomes insolvent it is actually a pretty 

orderly transition. Notice is provided to the participants, benefits 

are cut to what is known as the PBGC minimum, and the plan 

then starts paying benefits at a lower rate, so there is an automatic 

benefit reduction. And then the plan trustees petition for essentially what the law refers to as a loan from the PBGC, and the 

PBGC picks up payment for all those pension benefits going forward. 

Mr. ROKITA. Thank you. Time is out. 

Chairman ROE. I thank—Mr. Rokita. 

Mr. Kildee? 

Mr. KILDEE. Thank you, Mr. Chairman. 

Mr. Shapiro, can you discuss how more investment in international markets would affect the long-term stability of multiemployer pension plans. There has been discussion of broadening out 

the investments. Have you done any looking at that or how that 

may affect it? We are living in a global economy. Does that pose 

too many dangers or might it have some opportunities? 
43 

Mr. SHAPIRO. That question actually has come up a fair bit in 

our Retirement Security Review Commission. One of the steps that 

we took early on in that process was to invite several investment 

experts from various firms to talk to us about what they see happening in the equity markets in the coming decades with the particular question that we put to them, which is, many of our funds 

are assuming or looking forward to, in their budgets, 7 or 7.5 percent return and we wanted them to tell us if they felt that that was 

reasonable going forward. Certainly historically it has been very 

reasonable over the long term, but that is not the same question. 

Is it reasonable going forward? 

And all of them, you know, gave us the answer. They felt that 

it was but they all caveated the answer with some qualifications, 

as investment people tend to do, and what they said was that in 

order to achieve that going forward you really need to be looking, 

you know, more globally than you have been historically, that there 

is a need to diversify assets outside of traditional U.S. equity markets and to look for more innovative strategies that involve foreign 

countries and also innovative strategies domestically. 

So it is certainly our belief that if our plans are going to achieve 

those levels of return going forward that it would help them to embrace a more global approach to investing. And plans have already 

been doing that. If you look back over the past 5 or 10 years, multiemployer plans have absolutely been gradually increasing their investments internationally. I think that is a good trend and one that 

I see continuing. 

Mr. KILDEE. You at the table down there, you have an enormous 

responsibility. We have an enormous responsibility. I have been on 

this subcommittee for 36 years and I am leaving this subcommittee—leaving Congress—at the end of this year. And how 

well or not well have we done? 

What are some of the good things—what are some of—— 

Mr. ANDREWS. Has the gentleman’s time expired? I worry about 

that answer. 

Mr. KILDEE. They can answer my question, can’t they? 

Anything good that you say we—yes, Mr. Shapiro? 

Mr. SHAPIRO. I think PPA was in large part a very good thing. 

The Pension Protection Act—I wish I could remember who said 

this, because I quote it all the time and I feel like I am not giving 

proper credit, but in the multiemployer world the Pension Protection Act, in many ways, legislated good practice. It didn’t really create new ideas that plans should have been doing—we felt that 

plans always should have a long-term focus—but under the rules 

prior to PPA there was effectively an option for plans to kind of 

look very short-term at their picture and not look ahead. 

PPA put in place rules that said, ‘‘You can’t do that anymore. 

You must look forward.’’ And that, I think, is the strongest thing 

about PPA, and I regard that as being a tremendous improvement 

to our system. 

Mr. KILDEE. Well you give me some comfort, then, as I leave 

Congress. We did do something well there. Thank you. 

Mr. SANDER. I could speak to that, too. Thirty-six years brings 

you almost back to the passage of ERISA itself, and Congress has 

taken a focus on retirement security and recognized it as a very im-
44 

portant objective. The PPA—I agree with Mr. Shapiro—was a necessary and a good framework to carry us forward into this century 

and the needs. 

One of the real privileges I get in this job is to meet with some 

of our plan participants who are—who have been in this plan and 

receiving benefits sometimes for decades. We have over a dozen 

that are 100 years old and older, and I—we have a large group that 

are in the 90s and heading toward that 100 year old. 

When you meet with these folks again the universal comments 

that we get is they are grateful for the security of the plan, they 

are grateful for the structure, they are grateful for the fact that the 

plans are built in a way to provide real retirement security. And 

all of this, of course, on the defined benefit end comes from the 

work of ERISA and from the subsequent legislation, and we certainly see it every day in our work. 

Mr. RING. I don’t want to be—if you don’t mind—I don’t want to 

be a downer on that, but the one area where I think Congress, and 

frankly, the industry has not addressed the problem is really dealing with these particular industries where the demographics have 

left the plans with a substantial number of what has been referred 

to as orphans. And it is an issue that really needs to be addressed. 

There are many funds that are—have a diverse population, many 

employers, but there are a number of funds that don’t, and the current employers are saddled with the burden of really, as Ms. 

McReynolds says, being the PBGC for the rest of the industry. 

Mr. KILDEE. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman ROE. I thank the gentleman for yielding and for his 

36 years of service. 

Dr. Bucshon? 

Mr. BUCSHON. Thank you, Mr. Chairman. 

Ms. McReynolds, your testimony noted several quotes from the financial analysts who are concerned about ABF’s exposure to multiemployer plans. A recent Credit Suisse analysis painted a stark 

picture for these plans. 

Regardless of whether you agree with the report or not, is it fair 

to say that financial analysts and eventually the financial markets 

take these liabilities into account when looking at your stock 

prices, determining stock prices? 

Ms. MCREYNOLDS. Absolutely fair. It is the case that they do. 

You know, there are times when it is a higher profile issue, and 

obviously, you know, upon the heels of the Wall Street Journal article and, you know, the time after that, you know, there are, you 

know, many more questions about it, but one thing that it does in 

terms of our company—I meet with shareholders often—is it is a 

complexity. It is a nonsensical result that we have that we have 

to pay for people who never worked for us, and that it is a tremendous difficulty for someone who is trying to understand the direction of the company, you know, what impact that can have on the 

company going forward. 

And I believe our company has done a tremendous job over the 

years in addressing that, but going forward, an increasing burden 

there, or a continuing burden there, is going to, you know, have an 

impact on our company that I think others in the industry and the 
45 

shippers don’t want it to have because our company is a high-quality carrier and wants to remain that. 

Mr. BUCSHON. Mr. Henderson, are most of the people in the— 

your competitors—do they have defined contribution plans or defined benefit plans? I mean, what are the new people getting into 

this type—I am assuming there are always businesses coming into 

and out of your industry. What is the trend? Because it seems to 

me nationally the trend is defined contribution plans. Is that true? 

Mr. HENDERSON. Yes. That would be the trend among newer entrants into our industry. 

Mr. BUCSHON. I yield back. 

Chairman ROE. I thank the gentleman for yielding. 

Mrs. McCarthy? 

Mrs. MCCARTHY. Thank you. 

And I appreciate everybody’s testimony, and it is very refreshing 

to have everybody at the table agreeing that we need to look at 

something. I actually had voted for the—in 2006, the passage of the 

Pension Protection Act. One of the things, unfortunately, that we 

couldn’t get into it was making it more flexible that if you were 

having good years to be able to put more money into it. 

Most of us kind of look that way when we are saving for our future, ‘‘Hey, it is a good month. I can put another $50 away,’’ or 

something like that. I hope that we are able to look at that, because I do believe that we will come back and we will see, possibly—interest rates going back to 7 to 8 percent, but that is going 

to be down the road, so it is unrealistic for anybody to expect. I am 

hoping that I get 4 to 4.5, to be very honest with you, especially 

at my age. 

One question I would like to ask, because I have a curiosity—and 

I know you all—and I am not talking about what everybody gets, 

but the average retiree that retires today, what would their average pension be when they retire, if they retire at 65? 

Mr. Shapiro? 

Mr. SHAPIRO. I brought with me my book just in case such a 

question might come up. We have some survey data that I don’t 

have memorized but I can certainly reference for you. 

The NCCMP started about 3 years ago a survey that we send to 

all multiemployer plans asking them some very basic questions 

about what is going on in their plan and we compile the results annually in a report. The first year we did this was in 2009. We got 

a spectacular response that year. We had nearly 400 plans respond 

out of a universe of about 1,400 plans, which exceeded our wildest 

expectations. 

And if you give me just a moment to find the right page I will 

quote the number for you. From that report the median benefit 

paid to a multiemployer plan participant from those 400 plans, 

which we believe is representative of the whole universe, was approximately $900 per month. 

Mrs. MCCARTHY. $900 a month. 

Mr. SHAPIRO. $900. So the point there being that by and large, 

you know, these plans are paying very modest benefits to people; 

they are not exorbitant. 

Another measure to look at is, you know, obviously a large portion of the retiree population is older, retired many decades ago, so 
46 

we also asked the question, ‘‘What is the average benefit you are 

paying to someone who retired in the past year,’’ to get a better 

sense of current benefit levels. And there the answer was approximately $1,400 per month. So certainly more of a reasonable 

amount, but by no means exorbitant. 

And with that—Mike, do you have some numbers—— 

Mr. SANDER. Yes. I speak specifically to the—— 

Mrs. MCCARTHY. Mr. Sander, I know you are going to answer 

that question, but I also want to say that I am very impressed on 

the Western Conference Plan. You seem very realistic. 

What I am asking is, when you—let’s go back to 2008. What 

were you basically projecting as a possible interest rate? Were you 

looking at the 7 or 8 percent or were you—— 

Mr. SANDER. In 2008? 

Mrs. MCCARTHY. Yes. 

Mr. SANDER. Seven percent has been our assumption for a period 

of time. 

Mrs. MCCARTHY. Okay. Go ahead and, you can finish the other 

part of the question. 

Mr. SANDER. I was just going to mention that from our plan’s 

standpoint it—our average benefit for a normal retiree at age 65— 

and it does range—ranges because of the contribution rate, which 

can be, obviously, a factor in driving it—— 

Mrs. MCCARTHY. Sure. 

Mr. SANDER [continuing]. Is closer to $1,200 to $1,300 a month. 

We have some that are quite a bit higher due to higher contribution rates and longer lengths of service. 

We also have a food processing component, which has been a history in our plan for—almost since its inception, where the contribution rate is very low but individuals still receive a regular monthly 

benefit, albeit lower, out of that industry, which is very valuable 

to them. 

Mrs. MCCARTHY. And the other question I would like to ask is, 

obviously there are certain—depending on how you are working— 

we work in Congress—I worked as a nurse for over 32 years before 

I came here; I probably wouldn’t be working as a nurse at this particular time in my life because of my age, but being that you work 

with unions, because unions are in all your plans, from what I understand, and if they are construction or whatever—physical hard 

work—what is the average age of those people actually going in to 

look for retirement? 

Mr. SANDER. To our plan specifically, again, the age is about 61 

years is the average retirement age—the people draw their benefit. 

Mrs. MCCARTHY. Because I am only thinking of my two kid 

brothers who are about ready—one has retired and he is 6 years 

younger than me, and the other one will probably retire by at least 

62, only because physically their legs are gone, their hips are gone, 

their knees are gone. Both of them just had their knees done in the 

last 2 weeks. So that is a consideration, too, isn’t it, as far as having a defined—as far as having to make sure that they have some 

sort of insurance before they can start collecting, going on Medicare, going into—collecting Social Security, even? 

Mr. RING. In many of the transportation funds—or plans, the retirement age—eligibility for retirement age is much lower, and you 
47 

have people retiring, you know, early 50s, sometimes earlier. And 

that is largely because it is a very, very physically demanding job, 

but that means somebody is going to be receiving a pension for the 

next 40, 50 years. 

Mrs. MCCARTHY. Police officers, too. 

Mr. RING. Correct. 

Mrs. MCCARTHY. It is mandatory that they retire at a much earlier age than most people do. But you are right, these are things 

to be considered, but I definitely am interested in the Western Conference Plan to look at as a model and the flexibility that obviously 

we are going to need. 

Thank you. I yield back my balance of my time. 

Chairman ROE. I thank you for yielding. 

And, Ms. Noem? 

Mrs. NOEM. Thank you, Mr. Chairman. 

And my question would be for Mr. Sander. I know that you are 

tasked with the responsibility of not only representing the employees and the employer trustees, but also the labor and union trustees, as well, when you make management decisions, and I was 

wondering if you would briefly describe that for us, how you strike 

that balance in making those decisions about the plan, how you 

represent management and labor at the same time, and also how 

you represent the plan’s participants? 

Mr. SANDER. One of the privileges of working on this plan for a 

long as I have is to watch this board of trustees in operation. As 

I mentioned before the funding integrity of the plan has always 

been job one, principle one for this board. And as a result of that 

I think it has really engendered a pride in what this plan has accomplished over the years and what it is accomplishing. 

So we have an employer chairman, who represents the management side of the board; we have a union chairman that represents 

the union side. They work together every day in trying to strike 

balance in the various interests of moving the plan forward. 

And then we have a variety of committees. We have a very intensive committee structure that has delegated authorities from the 

board to investment committee, plan design committee. 

These types of committees work together. They are equal number 

of employer and union trustees on the committee. They make recommendations up to the full board. And this has worked very effectively for us. 

As far as the participant end, I cannot remember a time when 

some decision was in front of this board and the question was 

raised, ‘‘Remember, we act in the best interest of the participants. 

Let’s be sure we have got that covered first before we go to the secondary considerations.’’ So that really has always been the touchstone for this plan. 

Mrs. NOEM. Okay. Well, thank you. Just as a quick follow up, 

then, having access to plan financial information is important, but 

also not only to multiemployer plan participants but also to employers who are deciding whether to participate in that plan. So 

what steps—what action steps does the Western Conference Plan— 

have you taken to ensure that its financial information is transparent, that it is open and accessible to both the employees and the 

participants that are effected? 
48 

Mr. SANDER. We have taken a number of steps. Transparency is 

something we feel very strongly about. As I mentioned before, we 

always feel the more you look at this plan—employer, union, participant—the better you are going to like it. 

So our main source of disseminating information right now is our 

Web site, which receives several thousand hits a month. And we 

have posted on there the last 3 or 4 years of audited financial 

statements, actuarial reports, Form 5500s, and contact information 

if the interested party wants to inquire further. 

We also put our annual funding notices and any other information which becomes available. It is on there the next day, as soon 

as it is published by the appropriate party. 

We also do a variety of meetings. When an employer is—fact, I 

just offered Ms. McReynolds a meeting in Fort Smith, Arkansas. 

We are ready to come out and lay out what this plan is about— 

our objectives, our history, how our funding is structured—meet 

with the employer community, as we do with the union community 

and participants, to be sure they understand what is going on with 

the plan and their confidence in the plan can remain strong. 

Mrs. NOEM. Well, thank you. I appreciate that. 

Mr. Chairman, I yield back. 

Chairman ROE. I am going to take a prerogative of having a— 

if anyone has anymore questions—a second round of questions, this 

is such an important issue. 

And you have taken your time to come so I want to be sure that 

we get all—extract all the information we can. 

I certainly understand this problem from a personal standpoint. 

I had a father that was a factory worker who at 50 his job went 

offshore—went to Mexico. He actually ended up, after 30 years, 

after World War II with this plan, with essentially no pension plan. 

So I know what it is like as a family to be left out in the cold like 

that, and when you make a promise to people you ought to keep 

your promise. 

But the other side of that, and also, Mr. Sander, one of the 

things I found being on our pension committee at work, I was very 

interested in it doing well because that is how I was going to retire. 

So I had a vested interest in that plan doing well, as I am sure 

you have a vested interest in your plan doing well. 

I think the problems that I can see—and I think—the ranking 

member and I have been talking about some solutions up here, is 

the commitment to a defined benefit. That is a safety net, and certainly these payments are not overly generous. They are to keep 

you out of poverty when you retire and you worked somewhere for 

many years. 

I know I felt an obligation to my employees to provide them retirement. If you work for me for 30 years I want you to be able to 

retire and have a comfortable retirement in your future. I felt a 

moral responsibility to do that. So we do agree with we want to 

make sure we keep those promises. 

It looks like some of the problems is with the orphan employees 

you have got more people now receiving benefits than are paying 

in, as Ms. McReynolds clearly pointed out. I think the rate of return assumptions ought to be actuarially looked at, not so generous. 
49 

I think that you have got the remaining companies, like Ms. 

McReynolds or maybe less so with Kroger, but they can’t stay competitive under this—there is no way you can when—we always 

hear about health care costs exceeding—or forcing us not to be 

competitive, well this is exceeding anybody’s health care costs, 

what you pointed out. So I think the downturn in the economy— 

I do believe the economy will turn around and get better. I think 

this will look better, hopefully, in 2 or 3 years. And right now no 

government agency really has a way to do anything. Actually, the 

law actually hurt in the 1990s, it actually caused part of this problem. 

And I think another problem is the PBGC—I mean, we are talking about $9 per participant per year with 10 million people, I 

mean, that is two lattes at the airport at Starbucks, so that is definitely got to be looked at. 

Have I pretty much touched on all the problems? I am going to 

open it up now for you all to give us the solution. 

So if somebody—I don’t see anybody jumping out of their chair, 

but—— 

Mr. SHAPIRO. I will talk—— 

Chairman ROE. Go ahead, Mr. Shapiro. 

Mr. SHAPIRO. You know, I definitely don’t have the solution at 

this point, so I can’t truly answer your question as it was asked, 

but I can certainly give some thoughts on the directions that we 

have been thinking. You know, our commission really has been 

asking the exact same questions that you just asked for the past 

8 or 9 months. We don’t have the answers yet but we are working 

very close to a final proposal. 

But in terms of, you know, you mentioned earlier defined benefit 

plans and defined contribution plans as being the two ways to go, 

and in today’s environment that is correct. And I think it is pretty 

clear to us at this point that defined benefit plans are posing a 

problem for employers, as we have seen here and thousands more, 

where the risks that they are taking in these plans is more than 

they can deal with. 

From our perspective, defined contribution plans have a different 

problem, which is that there really is no guarantee of—or not even 

anything close to a guarantee of lifetime income for participants. 

And my personal feeling is that the recent move we have seen to 

combined contribution plans in the past decades is setting us up for 

a real problem of an entire generation of completely broke 75-yearolds, and that troubles me. 

But if you look at, you know, defined benefit plans on one side 

and defined contribution on the other, there is an ocean of space 

that exists between those two plans but you can combine features 

of both in such a way that you, you know, really mitigate and reduce the risk to the employers and at the same time, you know, 

provide some real income security to participants. You know, the 

whole focus of our commission has been exploring that space and 

trying to find how we can find ways to really capture the best features of both worlds and put it into a model that, as of today, 

doesn’t exist, but we hope will exist when we are done. So that is 

my quick perspectives on where we can go. 

Chairman ROE. Thank you. 
50 

I yield to the ranking member. 

Mr. ANDREWS. Thank you. 

I do think we have had discussion about solutions this morning, 

led by the chairman and certainly helped by the panel, and I wanted to explore two of the success stories I think that we heard. 

Mr. Sander, after the crash of 2008 your fund went down to what 

percentage funded? 

Mr. SANDER. Mr. Chairman, our PPA percentage was at 85 percent in 2009, which was the lowest point. 

Mr. ANDREWS. Okay. And where are you now? 

Mr. SANDER. 90.3. 

Mr. ANDREWS. And what changes have you made to get that 

progress? 

Mr. SANDER. Well the trustees—actually, after the dot-com bust 

the trustees took the action that I mentioned earlier and they were 

able to improve funding to the point where they were able to actually improve benefits on temporary basis in 2006 and 2007. Those 

temporary improvements were rolled back beginning in 2009 to, 

again, to balance the books, if you will. 

Trustees have also taken action with the investment portfolio to 

take a look at some alternative forms of investment. We are looking at timberlands and farmland, things which may not return immediately but over the longer term are exceptional opportunities 

for long-term growth. So—— 

Mr. ANDREWS. And these really—I know the decisions were made 

in the context of the PPA, but you weren’t really under any gun 

or deadline. These were voluntary decisions that were consistent 

with your fiduciary duty, right? 

Mr. SANDER. That is correct. The trustees, I think, felt that they 

needed to take some steps in order to get back to their historic 

funding level goals. 

Mr. ANDREWS. Now, Mr. Henderson, you have mentioned consolidation as one of the ways—and Kroger certainly put its money 

where its ideas were by in effect prefunding some of the benefits 

of that consolidation. You should be commended for that. 

What other reforms did Kroger participate in, in some of those 

multiple multi-plans that you are in. What worked? 

Mr. HENDERSON. The situation we found ourselves in was that 

we had become the dominant contributing employer to these four 

plans, and they ranged anywhere from a $50 million plan, the administrative expenses of which were eating up about 25 cents of 

every contribution dollar simply because it was a small plan, all 

the way to a $2 billion plan. And when we looked at the underlying 

investments in those plans we discovered that there were roughly 

100 individual asset allocations that were managing—I hate to use 

the word, but only about $2.5 billion worth of assets. 

And so working with labor and coming up with the solution to 

this issue we were able to consolidate the plans. The benefits of 

that should be significantly lower administrative expenses to run 

the plan, lower asset management fees—when you make larger 

asset allocations you—— 

Mr. ANDREWS. Better net returns. 

Mr. HENDERSON [continuing]. Do enjoy lower fees. 

Mr. ANDREWS. Yes. 
51 

Mr. HENDERSON. And then I guess it goes without saying that 

when you allocate significantly larger numbers to folks like FIMCO 

you do get a higher level of attention to your account. 

Mr. ANDREWS. FIMCO would certainly agree with that. 

Mr. HENDERSON. They would agree with that. And so we thought 

there were a number of advantages to the plan, and also, with interest rate structures being what they are, we were able to take advantage of capital markets—— 

Mr. ANDREWS. Now, what has happened to the funding levels of 

some of those plans? Where did they start before these reforms and 

where are they now? 

Mr. HENDERSON. Before the consolidation all four of them were 

in the red zone and had enacted certified rehabilitation plans. After 

the contribution that we made the combined plan is now 91 percent 

funded. And we were able to actually improve and secure the benefits of those participants. 

Mr. ANDREWS. See I think the stories we just heard give us some 

guiding principles for what we ought to do here. This was a combination of subtle and gentle incentives to make very hard decisions about benefits and consolidation. I am sure those were not 

easy things to do. Coupled with an infusion of cash—in this case 

from Krogers—I am not sure we are going to be fortunate enough 

to have a Kroger in every one of those situations. 

And where we are not I think we need to explore a rational and 

fair situation where we can either entice private capital to play 

that role in a balanced and fair way or perhaps, under certain circumstances, provide for more direct loan functions that would help 

others. Because what I am hearing from Ms. McReynolds is that 

even if the fund she is involved in made all of those reforms the 

fact that there just aren’t enough men and women left standing 

that are prosperous to solve the problem. Is that a fair characterization? 

Ms. MCREYNOLDS. That is absolutely fair. 

Mr. ANDREWS. Yes. And—— 

Ms. MCREYNOLDS. Well, and, you know, one of the things that 

hasn’t been mentioned yet that I am very concerned about—I guess 

it has been mentioned on the positive side by Mr. Sander—is, you 

know, whenever I meet with our employees I have to interact with 

them, not necessarily respond because I am not totally responsible 

for, you know, the red zone funds, but they are aware of the troubled funds. 

$80 million a year is the number we contribute to red zone funds. 

And I have to be able to look back and our employees, you know, 

who are concerned about whether they are going to have a retirement benefit and we are contributing such tremendous dollars to 

funds that need to be improved, and I think your point is right—— 

Mr. ANDREWS. I realize my time is up, but I think that employers 

like yours are—like you are in a situation here where you are not 

in any way culpable or responsible for this problem but it is a huge 

business problem for you and your employees, and I think we ought 

to find some more fair way to address that. 

Ms. MCREYNOLDS. Yes. Thank you. 

Chairman ROE. Thank the gentleman for yielding. 

Mr. Rokita? 
52 

Mr. ROKITA. Thank you, Mr. Chairman. 

Hello again, everyone. 

Following up on a conversation between Mr. Andrews and Ms. 

McReynolds, do the other witnesses have anything to add or take 

away from that? Do you agree, disagree? 

Mr. Shapiro? 

Mr. SHAPIRO. I would like to add one thing, which is, you know, 

when you look at the multiemployer plan universe, the actual—the 

largest sector of multiemployer plans by a healthy margin is actually the construction industry. That is where most of the plans are. 

And they have a somewhat different problem, by and large. They 

don’t really generally have an orphan problem, per se, but they 

have a work level problem. You know, the construction industry 

right now is down—in the union areas—numbers vary, but easily 

in excess of 20 percent, and in some parts of the country it is more 

like 50 percent. And much of the problems facing those plans would 

be repaired simply by some economic recovery and get some construction going on. I think the vast majority of construction industry plans, even the ones that have some troubles, if they can get 

their work levels even halfway back to where they were, you know, 

5 years ago those troubles would go away pretty quickly. 

So their perspective is a little different than what has been discussed here on this panel. 

Mr. ROKITA. Thank you, Mr. Shapiro. 

Anyone else? 

Seeing none, I wanted to follow up with Mr. Ring again, along 

the same lines we were discussing earlier. On page eight of your 

testimony, at the last paragraph there you say, ‘‘What is important 

to understand is that in certain sectors of the economy and industries the extent of the multiemployer pension plan problem is much 

worse than has widely been reported.’’ Can you get any more specific on that, what you wrote or what has been said here today? 

What exactly do you mean and how extensive is this? 

Mr. RING. Yes. I would be happy to. 

You know, we talked earlier about the fact that some reports say 

red zone plans are 27 percent of the overall plans and—multiemployer plans in the country. But of those 27 percent there are a 

number of those that are facing insolvency, and—— 

Mr. ROKITA. How many? 

Mr. RING. What is that? 

Mr. ROKITA. How many? Roughly how many? 

Mr. RING. I don’t know if you have a number on—— 

Mr. ROKITA. Mr. Shapiro? 

Mr. SHAPIRO. I do. It is impossible to come up with a precise figure, and we have tried. Right now we have been estimating somewhere in the neighborhood of 5 percent of all plans have a danger 

of insolvency. 

Mr. ROKITA. Thank you. 

Mr. SHAPIRO. It is not a precise number at all, but that is a ballpark figure of what we are looking at. 

Mr. ROKITA. Thank you, Mr. Shapiro. 

Mr. Ring? 

Mr. RING. Well, and, you know, at our firm we have a number 

of multiemployer plans and we meet regularly to talk about issues 
53 

facing the plans. I am familiar with about a dozen plans with 

enough participants that it will not take the—take long to deplete 

the PBGC’s current funding. So, you now, while we could say, well, 

there are a lot of plans that are doing fine and it is just a small 

number of plans that are insolvent, those small number can really 

wreak havoc relatively quickly. 

Mr. ROKITA. Thank you. 

Same question to the other witnesses. Anything to add there? 

Hearing none, I yield back. Thank you, Mr. Chairman. 

Chairman ROE. I thank the gentleman for yielding. 

Mr. Kildee? 

Mr. KILDEE. Just briefly, between the Americans—United States 

system and the Canadian system—we have many companies that 

operate in both the countries, and their economies are similar—are 

there elements of the Canadian system—I will address this to Mr. 

Sander—that perhaps we could emulate, embrace, or are there 

some elements that we should avoid? Anything we could learn from 

looking at our neighbor to the north? 

Mr. SANDER. I have really been focused so much more on the 

Western Conference side, I think maybe Mr. Shapiro has some 

ideas in that regard. 

Mr. KILDEE. I defer to Mr. Shapiro. 

Mr. SHAPIRO. Another aspect of our commission that, again, that 

has been going on for many months now is we actually had people 

come and talk to us from other countries to ask the questions of, 

how do your plans work? You know, what do you think of them? 

What are the strengths and what are the weaknesses? 

And we had a fellow come and speak to us a few months ago 

from Canada and he gave us a very excellent presentation on how 

their plans work. There are some similarities and some differences. 

You know, on the surface they look—their multiemployer plans 

look much like ours. The benefit structures I think are similar; the 

way they are managed is fairly similar. 

But one thing which is fairly different is in most of the provinces—and they actually have different rules that vary by province—but in most of the provinces there is no concept of withdraw 

liability. So if an employer chooses to leave they leave and the plan 

has to make due as best it can. 

And in some ways—it is interesting because a lot of the employers that we have that want to leave the system, you know, they 

don’t leave because of withdraw liability but they also want to 

leave because of withdraw liability. Once you take it away there is 

not as much reason to leave in the first place. 

So it is sort of—it is hard to say what the true impact is of that 

concept, but in Canada that concept is absent. What that means is 

ultimately if the assets of the plan are insufficient to pay benefits 

because of a crisis or because of whatever reason their benefits, in 

contrast to ours, are not guaranteed. So what would happen then 

is if the fund does not have enough money to pay benefits the 

trustees ultimately, after they have exhausted all of their other options of trying to negotiate more money, of trying to fix things perspectively, do have the authority to lower benefits. That is a power 

that by and large our trustees do not have. 
54 

That concept has certainly gotten a lot of discussion with our 

commission and I think at this point I can’t really comment on, you 

know, to what degree we feel like we would be interested in that, 

but I can certainly say that we have discussed it extensively. 

Mr. KILDEE. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman ROE. Thank the gentleman for yielding. 

Mrs. Roby? 

Mrs. ROBY. Thank you, Mr. Chairman. 

Thank you all for being here today. We really appreciate it. In 

the short time I have been here you have already given me a lot 

of insight and I look forward to reviewing the first round of questions that were asked today. 

Mr. Ring, can you discuss some of the well-intentioned but possibly constraining legal boundaries limiting plan trustees as they 

consider changing the benefits under the law? And I think the perfect example is the anti-cutback rules, but could you expand on 

that? 

Mr. RING. Well, as was said, the PPA put in place some very, 

very good requirements and tools for trustees of plans, and in a 

number of the plans that are well-funded and have a broad base 

of employers those type of tools are very useful and have kept the 

plans in good shape. 

The plans that are of real concern are the ones that are facing 

insolvency. And in those places, in those plans those tools and restrictions of the PPA actually tie the hands of the trustees to a certain extent. 

I serve as counsel to a number of trustees, boards, and they are 

incredibly frustrated that they have nothing to do—nothing that 

they can really do except watch the plan slide towards insolvency. 

They have cut benefits to the absolute bare minimum. They really 

can’t cut any further. And they have raised contributions to a place 

where they know they are going to bankrupt their contributing employers. 

We know of plans that have actually just capped the highest contribution rates because they know and they have gone out and got 

studies to show that if they raise the contribution rates any higher 

they will put their golden gooses out of business. So those are— 

there are no other tools, and that is the thing I—and Congressman 

Andrews mentioned it earlier, they are—I think trustees in particularly in those type of plans need to have some tools to be able 

to address these type of funding issues. 

Mrs. ROBY. In your experience, I mean, how can plan funding 

concerns have affected business or legal decisions made by your clients? 

Mr. RING. Well, the—so many contributing employers these days 

are fixated on this pension problem. Collective bargaining is absolutely focused on the pension problem. When unionized employers 

look at their overall labor costs most of the time the wages and 

other cost structures are probably in line with their competitors; it 

is the pension cost that is just completely off the mark. 

And so, you know, in collective bargaining that is a—it is a huge 

issue. It affects the contributing employers in their ability to attract investors, to get any type of financing. And so it really limits 
55 

and constrains employers in these plans and their ability to compete in the marketplace. 

Mrs. ROBY. Can we just go back for 1 second—the potential 

tools—and you may have discussed this already, but going back to 

my first question, can you give some examples of what some of, you 

know, the best tools would be that we could provide to deal with 

this limiting structure that is in place now? 

Mr. RING. Well, Mr. Shapiro mentioned it, it is something that 

I think is going to have to be looked at, and that is, there may be 

certain financial benchmarks where trustees are going to have to 

be able to look at reducing accrued benefits for retirees. It is a kind 

of the third rail of pension discussions because no one wants to address that, but—and I understand, you know, the sensitivities because these promises were made to the pensioners. 

On the other hand, their benefits are going to be cut to PBGC 

minimums if nothing is done and it will be an even greater cut. 

And in many ways these pensioners, while they continue to receive 

their full pensions, the active employees are receiving very little accruals on their pension; they are receiving even less, you know— 

I have been involved in negotiations for concessions where employees are making 15 percent—or they have taken 15 percent wage 

concessions, currently. 

So, you know, in terms of the shared sacrifice in this economy 

maybe looking at some type of benefit modifications for pensioners 

is going to be necessary. 

Mrs. ROBY. Thank you. 

My time is expired. 

Chairman ROE. Thank the gentlelady for yielding. 

Mr. Thompson? 

Mr. THOMPSON. Thank you, Chairman. Thanks for hosting this 

subcommittee hearing. A very important issue. When I came to 

Congress along with the chairman here in January 2009 some of 

the first businesses that I visited this was an issue. These were obviously economic tough times at that point, but some of these were 

very solvent, strong companies doing well and the only potential financial threat was trying to deal with these pension programs. 

And in fact, the potential program—the pension programs at that 

point—and I think it—some of it was an unintended consequence 

of the Pension Protection Act of 2006. It was the pension program 

and those funding requirements that had almost the potential to 

put them out of business, whereas they were solvent, going well 

even in tough economic times. 

And so I want to come back to the whole issue of competitiveness. Ms. McReynolds, I know you touched on that. You talked 

about, you know, the significant differences in terms of pension 

costs. Looking at your testimony, you know, talk about 257 percent 

higher for those average nonunion employers and it was an astronomical number, your 2011 per employee pension costs were 1,437 

percent higher than those competitors—one or two for nonunion 

competitors. 

I wanted to look at the broader implications of that. What is the 

broader implications in terms of competitiveness, solvency on your 

business as a result of that issue? 
56 

Ms. MCREYNOLDS. If we had the orphan retiree problem solved— 

in other words, we didn’t have to bear the—the cost for people that 

never worked for us, our company would be much more competitive 

in the marketplace. By that I mean, you know, there is a certain— 

we are in the less-than-truckload business. There is a market for 

that, okay? There is a variety of types of customers and they require a variety of service levels and will pay certain prices. Some 

of those customers are more price sensitive than others. 

What happens to us as we have to deal with this cost is that we 

more and more have a smaller slice of that market that is available 

to us. It is like the very most premium, where we give, you know, 

the highest level of service because we have higher prices, we are 

worth it, you know, when you get right down to it, and I wouldn’t 

suggest that we are not, but if we were more competitive we would 

have a broader part of the less-than-truckload market available to 

us and that would allow us to grow our company and add jobs to 

our company. 

And, you know, let me say, you know, again, we are very comfortable paying the retirement benefits for our own employees. We 

are very concerned about them having benefits when they retire. 

Our basic problem is having to pay for people who never worked 

for us. 

Mr. THOMPSON. Just as a follow up, you know, one way to ensure 

plan solvency is to continually raise contributions. Can you explain 

whether these problems can be solved simply by requiring larger 

contributions? 

Ms. MCREYNOLDS. We have experienced that. I think in my testimony I also reference in our last collective agreement that began 

in 2008, because of PPA and the requirements for red zone and yellow zone plans we had a 7 percent increase in our pension cost 

every year that actually resulted in 40 percent higher pension 

costs, you know, from 2008 until 2013. That was a period of time 

where no one was able to increase pension costs because of what 

was going on with the economy, yet we had to deal with that. 

And so, you know, we are in a situation where because of the requirements under PPA kind of the normal collective bargaining 

process can’t function the way that it needs to, and I think Mr. 

Ring commented about this earlier. We need the tools to be able 

to address our costs in a way that make sense at the collective bargaining table rather than having to have ever increasing contributions that just are a burden and make us less competitive. 

Mr. THOMPSON. Thank you very much. 

Chairman, I yield back. 

Chairman ROE. I thank the gentleman for yielding. 

And I want to thank the panel today, the witnesses, for taking 

your time to testify in front of the committee. It has been an extremely informative committee—subcommittee hearing, and I will 

yield now to the ranking member for closing remarks. 

Mr. ANDREWS. Well, thank you, Mr. Chairman, for—and your 

staff and our staff for working hard to put together an excellent 

panel. I think the members have been educated by this and we 

thank the panel for all their preparation. 

Again, I think it is both welcome and refreshing that there have 

been ideas put forward here about how to address this problem, 
57 

and I am not suggesting that these are universally agreed to or 

that they are all right, but I am hearing some things I think sound 

good. One is, with respect to plans that are burdened because of 

a lot of orphaned retirees there ought to be some credit facility 

available that helps that plan get through the present situation so 

it can see the light at the end of the tunnel, at least reduce those 

costs. Where the private sector can provide that credit facility, 

great; where it can’t, I think we need to look at some other mechanism. 

I also think that any such credit facility that is made available 

should carry with it the obligation to enact some of the reforms we 

have heard about this morning so the plan can strengthen itself internally. I think it shouldn’t be a blank check; I think it should be 

a quid pro quo where if you do your part, if there is truly shared 

sacrifice there is a benefit for that shared sacrifice. 

I certainly think there should be no discharge in bankruptcy of 

a withdraw liability. I think this would be a catastrophic result for 

this whole sector and I think working with our friends on the Judiciary Committee we need to address that if, in fact, there is an adverse court decision. 

And then finally, for those who are in the enviable position of 

being able to choose to overfund their plans, I don’t think there 

should be any retardation of that at all. I think such overfunding 

should be completely deductible. My personal view is that if the 

money—if the employer or the trustees want to they ought to be 

able to transfer that money into another ERISA trust, like for 

health care, if they want to. I think that we ought to encourage 

people to put money away to help their employees in an ERISA 

trust under just about any circumstances. 

And I think we have learned a lot today, and I am sure some of 

those ideas would work, some wouldn’t. We would welcome additional ideas, certainly, from the community. 

But as I said at the very outset, this is a problem that has a solution. It doesn’t require the parties to fight each other, and we 

heard none of that this morning. It does require us to listen and 

learn, and I think we learned a lot from you this morning. 

And, Chairman, I commend you for your leadership on this and 

promise you that our side will work in good faith very hard to try 

to get this problem fixed. Thank you. 

Chairman ROE. I thank the gentleman for yielding. 

And I want to thank the committee once again, and learned—I 

learned a lot today and certainly am committed to try to help—be 

of any assistance that we can be to help solve this problem. And 

certainly I think Ms. McReynolds’ statement is that we don’t mind 

paying for our employees is one of the most reasonable things I 

have ever heard, but for people that have never worked for our 

company we have a little bit of a problem with that, and I certainly 

get that. I put myself as a fiduciary in a single-employer system 

and think, ‘‘What if I were asked to pay for the pension benefits 

of my competitors across town?’’ That is exactly what you are 

asked—have been asked to do with this through the way it is set 

up. 

I agree with Mr. Andrews. I think there are solutions here, and 

we are certainly committed to trying to find those, and I think we 
58 

need to get on with it, because 18 months is not—that is how long 

it is between now and 2014. 

So I thank you all, and we look forward to working with you. 

And being no further business, the subcommittee stands adjourned. 

[Additional submissions of Chairman Roe follow:] 

July 3, 2012. 

Hon. PHIL ROE, 

U.S. House of Representatives, Washington, DC 20515. 

DEAR CHAIRMAN ROE: As members of the Construction Employers for Responsible 

Pension Reform, a coalition of trade associations representing thousands of construction companies that contribute to multiemployer defined benefit pension plans 

(‘‘MEPPs’’), wish to express our concern with a statement made by Mr. Josh Shapiro, Deputy Director for Research and Education, National Coordinating Committee for Multiemployer Plans. Mr. Shapiro spoke during the June 20, 2012, hearing on Assessing the Challenges Facing Multiemployer Pension Plans before the 

Education and Workforce Subcommittee on Health, Employment, Labor and Pensions. Mr. Shapiro properly acknowledged that recent reductions in industry activity 

is a significant problem for construction employers that contribute to MEPPs, but 

his response in answer to a question that ‘‘if the work levels get even halfway back, 

their problems will go away’’ vastly understates the multiple challenges construction 

industry plans are facing nationwide. 

Construction industry employers contributing to MEPPs are in a particularly precarious position at this time. It is true the economic recession has affected the construction industry to a far greater degree than most industries, and the decline in 

demand for construction services has led to an extraordinary decline in work hours 

for construction workers. At the same time, however, severe investment losses have 

devastated plan assets, and rigid Pension Protection Act (PPA) funding rules and 

anti-cutback restrictions have put pressure on contributing employers. Bankruptcy 

and abandonment by other contributing employers brings even more pressure to 

those remaining employers. Unfortunately, the collapse/insolvency of defined benefit 

pension plans is a real and immediate problem. Even for plans not currently in a 

precarious funding position, collapse/insolvency is a highly predictable outcome. 

It is clear that recovery of the construction economy alone will not solve the 

MEPP crisis plaguing contributing employers. While plans may be able to improve 

their funded status as the construction economy improves, the level of improvement 

would likely be insufficient to overcome the combined effects of the economic downturn, decline in competitive market share, withdrawal of contributing employers, 

and an aging workforce. The reasons include: 

• Current and future construction industry economic contractions will lower contribution income, which is based on hours worked; while, at the same time, contribution rates are going up and competition for business is great. 

• Stock market instability for the foreseeable future. Under the best of circumstances, plans would take 15 years or more to recover from 25 percent-plus market losses incurred in 2008 and 2009. 

• Shrinking contribution base causing a progressively unfavorable active-participants-to-retired-participants ratio—i.e., fewer and fewer construction employers are 

contributing to MEPPs, and those remaining have a shrinking market share, causing a decline in hour-based contributions for active participants (workers) while 

plans are facing benefit pay-outs to ever-increasing numbers of baby-boomer retirees. 

• Ironic position of successful employers ultimately at risk because pension fund 

and withdrawal liability rules leave the last surviving company with all the liability 

for pension fund solvency. 

• Instability of plans in other industries, such as the trucking industry, affecting 

the viability of construction employers that contribute, or previously contributed, to 

those plans. 

The risk, even for employers contributing to plans not in immediate danger, is 

unsustainable. It is an unstable system with very real and foreseeable dire consequences. The industry cannot rely on market growth alone as a solution for these 

plans’ recovery. According to Segal, in 2001 construction industry plans had an average funded ratio of 98 percent; however in 2006, the year construction industry 

employment and man hours peaked, plans were only funded at an 80 percent ratio. 

As you know, we are committed to developing constructive solutions to the problems facing multiemployer pension plans. We continue to work diligently with a 
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broad coalition of labor and management from affected industries to jointly present 

ideas to Congress. Congress and the agencies have a coming window of opportunity 

to make needed structural changes to ERISA that will ensure the long-term viability of multiemployer pension plans. We look forward to working closely with you on 

that critical project. 

Sincerely, 

ASSOCIATED GENERAL CONTRACTORS OF AMERICA, 

ASSOCIATION OF THE WALL AND CEILING INDUSTRY, 

EASTERN CONTRACTORS ASSOCIATION, INC., 

INTERNATIONAL COUNCIL OF EMPLOYER OF BRICKLAYERS AND ALLIED

CRAFTWORKS, 

MECHANICAL CONTRACTORS ASSOCIATION OF AMERICA, 

NATIONAL ELECTRICAL CONTRACTORS ASSOCIATION, 

SHEET METAL AND AIR CONDITIONING CONTRACTORS NATIONAL ASSOCIATION, 

THE ASSOCIATION OF UNION CONSTRUCTORS. 

Prepared Statement of the U.S. Chamber of Commerce 

The U.S. Chamber of Commerce would like to thank Chairman Roe, Ranking 

Member Andrews, and members of the Subcommittee for the opportunity to provide 

a statement for the record. The topic of today’s hearing—challenges facing multiemployer pension plans—is of significant concern to our membership. 

As sponsors of multiemployer defined benefit plans, a number of Chamber members have a substantial interest in the viability of the multiemployer plan system. 

Funding for multiemployer plans comes entirely from employers, who are at financial risk when a plan faces funding problems. Therefore, funding and accounting 

issues create substantial challenges not just in maintaining the plan but also for 

the employers’ business. 

While all defined benefit plans have been negatively impacted by the financial crisis, certain multiemployer plans have been particularly hard hit as the current financial crisis exacerbates long-term funding problems resulting from shifting demographic trends and financial problems within certain industries. While current law 

requires insolvent employers to pay their share of liability upon withdrawal from 

the plan, most bankrupt employers are unable to realistically meet that liability. 

Therefore, the remaining employers become financially responsible for the retirement liabilities of the ‘‘orphaned’’ retirees. This system results in untenable contribution levels for the remaining employers, which can force them into insolvency 

as well. 

Moreover, in a multiemployer plan, there is joint and several financial liability between all employers in the plan. Therefore, when one employer goes bankrupt, the 

remaining employers in the plan are responsible for paying the accrued benefits of 

the workers of the bankrupt employer. Because of this liability, there is the fear of 

an employer being ‘‘the last man standing’’ or the last remaining employer in the 

multiemployer plan. 

Reform of the Multiemployer Plan System is Necessary. The Chamber supports 

multiemployer funding reform. Without such reform, many employers—including 

many small, family-owned businesses—are in danger of bankruptcy. 

In April, the Chamber released a white paper entitled ‘‘Private Retirement Benefits in the 21st Century: A Path Forward.’’ The paper makes recommendations for 

all retirement plans and includes a special section for multiemployer plans to address the unique challenges faced by them. In that paper, we offered the solutions 

detailed below. 

Withdrawal liability is a great burden that may force employers to stay in multiemployer plans even when it is not economically feasible. The Chamber feels that 

a comprehensive solution must be sought to allow for a more robust multiemployer 

plan system and to maintain equity among contributing employers. 

Another problem arises from the nature of multiemployer plan funding. Benefit 

increases are not anticipated in funding but are often granted at contract renewal. 

These increases often apply not only to active workers, but also to retirees. This 

practice may put the plan into an underfunded situation because the benefit increases cause a ‘‘loss’’ for the year. This loss is generally funded over a long amortization period, such as 20 years. While this additional expense may be projected by 

the plan to be affordable for active employers that are contributing a negotiated contribution rate (usually dollars per hour or a percentage of pay), a withdrawing employer may be immediately liable for its share of the underfunding. 

In order to prevent bankruptcy among remaining employers in multiemployer 

plans and unanticipated bankruptcy on withdrawing employers, comprehensive 
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funding reform should focus on allowing plans to be financially solvent on an ongoing basis. Examples of such provisions include, but are not limited to, additional 

tools for trustees to maintain solvency, partitioning plans and promoting mergers 

and acquisitions between certain plans. 

Even for plans that are not at financial risk, changes could ensure that they remain financially viable. For instance, the assumptions used to determine withdrawal liability should be consistent with those used to determine contribution requirements. They should not be more conservative, forcing the withdrawing employer to subsidize active employers. In addition, benefit increases should be moderated. In the past, benefits were increased if the plan became overfunded and, as 

noted above, granted even when the benefit increase would make the plan underfunded. This prevented plans from being able to fall back on extra contributions in 

later years. As a result, any future underfunding would require additional contributions by current employers. Reform efforts should focus on moderating benefit increases so that they are not made simply because the plan is overfunded. One way 

to do this would be to require disclosure of the amount of liability associated with 

benefit increases—not just contribution increases. 

Finally, the procedural rules that allow employers to arbitrate disputes over the 

amount of withdrawal liability require change, at least with respect to small employers. For example, the time frame for requesting arbitration is very short, and 

a small employer, who may not have significant administrative resources, is likely 

to miss it. 

The suggestions above are just examples of steps that policymakers can take. The 

Chamber is committed to addressing multiemployer funding issues and is willing to 

discuss any viable ideas that allow participating employers to remain financially solvent. 

Reform of the Multiemployer System is NOT a Union Bailout. As mentioned 

above, contributions to multiemployer plans are funded entirely by employers, not 

unions. Therefore, it is employers at financial risk, not unions and reforms to multiemployer plans have no financial impact on unions or their activities. Misleading 

characterizations, such as this, hinders progress that is essential to implement 

much-needed reform. 

Without a real reform to the multiemployer system and resolutions to the underlying problems, more employers will be forced into bankruptcy and more workers 

will be left without a secure retirement. We stand ready to work with Congress and 

all interested parties to resolve these issues as soon as possible. Thank you for your 

consideration of this statement. 

[Additional submission of Mr. Andrews follows:] 

June 20, 2012. 

Hon. PHIL ROE, 

U.S. House of Representatives, Washington, DC 20515. 

DEAR REPRESENTATIVE ROE: As employers in the construction industry, the Construction Employers for Responsible Pension Reform, we would like to express our 

fundamental components for multiemployer pension plan reform that will create 

long-term viability for employers. The group of 8 leading construction trade associations represents more than 34,000 construction employers, the vast majority of 

which are small family-owned business. 

Multiemployer pension plans are common in the unionized sector of the construction industry and provide employers the opportunity to provide their employees with 

a defined benefit plan that gives them ‘‘portability’’ to earn continuous benefits as 

they go from job to job within the same industry. Of the 10 million participants in 

multiemployer defined benefit plans, nearly 54 percent are construction industry 

plans. 

The majority of multiemployer plans suffered significant losses as a result of the 

financial crisis. Recently enacted relief legislation and some improvements in investment returns have helped some plans, but the current rules, long-term demographics, and market conditions continue to put at risk the viability of the plans 

and their contributing employers. This is particularly true for the construction industry, which has been affected by the economic recession to a far greater degree 

than most industries. In short, further legislative reform is needed and, with the 

Pension Protection Act nearing sunset, the process must begin now. 

We believe that Congress should enact reforms that will: 

• Recognize the unique relationship between the employer and workers in the 

construction industry 

• Promote a reasonable and sustainable retirement benefit through shared risk 
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• Provide flexible rules to allow trustees of plans facing financial instability to 

adapt to changing economic and market conditions as they occur 

• Mitigate the unintended consequences of the ‘‘last man standing’’ rule enacted 

in the Multiemployer Pension Amendments Act 

• Guarantee transparency and reporting by plans to all affected parties 

These principles are needed to help the tens of thousands of small employers that 

contribute to the plans and to protect the retirement security of their hardworking 

employees. 

Sincerely, 

ASSOCIATED GENERAL CONTRACTORS OF AMERICA, 

ASSOCIATION OF THE WALL AND CEILING INDUSTRY, 

FINISHING CONTRACTORS ASSOCIATION, 

INTERNATIONAL COUNCIL OF EMPLOYER OF BRICKLAYERS AND ALLIED

CRAFTWORKS, 

MECHANICAL CONTRACTORS ASSOCIATION OF AMERICA, 

NATIONAL ELECTRICAL CONTRACTORS ASSOCIATION, 

SHEET METAL AND AIR CONDITIONING CONTRACTORS NATIONAL ASSOCIATION, 

THE ASSOCIATION OF UNION CONSTRUCTORS. 

[Whereupon, at 11:43 a.m., the subcommittee was adjourned.] 

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