A target date for the creation of a single administrative agency should be established far enough in the future for there to be adequate preparation for a smooth transition of control from the Labor Department and Treasury Department. A period of 12 to 18 months from the enactment of a new bill should give sufficient time. If Congress were to mandate an immediate change to a single agency, it would probably create new chaos in the administration of the law just at the time when plan administrators are beginning to understand what is required of them.

Small Employer Problems

Our Union has seen the real problems which have been created for small plan administrators, in particular in the areas of reporting and disclosure. We have many pension agreements in force which cover fewer than 100 participants and have experienced difficulty in negotiating benefit improvements because of the additional administrative costs for these plans. While some accommodation has been made to give relief to small employers, a still more pragmatic approach could have been taken by the administering agencies. Since the agencies have not in general felt that they could give sufficient relief to small employers, we believe that some changes will need to be mandated. For example, however much annual report forms may be simplified, untrained personnel employed by small firms still have difficulty selecting the correct figures to transfer from reports of their actuaries or trustees. Therefore, they have to turn to their expert consultants to carry out this routine function, at significant additional cost to the plan. We submit that the Labor Department should accept copies of actuarial reports and trustees' reports from small employers and that actual plan documents should be acceptable in lieu of the plan description form EBS-1. There are particular problems in defined benefit plans as opposed to defined contribution plans. The UAW believes that only defined benefit plans, where the participants are not required to bear the burden of the risk of

experience, can provide adequate pensions for workers. Therefore, we would like to see particular attention to simplification of reporting requirements

for these plans.

Small plan administrators and representatives of small businesses, who would like to see plans with less than 100 participants exempted from all reporting responsibilities, frequently argue that no small plan abuses were ever heard of in pre-ERISA hearings. The UAW knows from its own substantial experience with such plans that, despite the lack of publicity, there was a multitude of abuses. Therefore, it is vitally important that any accommodations made for small plans do not undermine the main intent of Congress in passing ERISA -- to better protect plan participants.

We believe that if the federal agencies adopt a practical, commonsense approach to the problem, substantial relief may be given to small plans without endangering the new rights and protections of their participants. It should be possible to achieve relief by administrative regulations; but in the absence of satisfactory administrative changes, Congress should take legislative action to grant relief to small plans.

Suggested Areas for Amendment to ERISA

As we stated at the outset, the UAW firmly believes in the importance and soundness of ERISA. We would object very strongly to any proposed amendments which would detract from the overall integrity of the law. Over the past three years, since the passage of ERISA, some minor deficiencies or technical problems have become obvious. We ask the Committee to consider the following proposals:

Guaranteed Benefits Under Title IV:

1.

All changes in plan benefits are phased in over five years from
the date of amendment. The purpose of this provision was to prevent
abuses by plans which might liberalize benefits in anticipation of

2.

3.

termination. Therefore, changes which were mandated by ERISA,
such as an improved vesting schedule, should not be subject to the
phase-in.

In specifying the maximum guaranteed benefit which can be insured
by the PBGC, no distinction is made for disabled retirees. Since
the maximum amount payable is defined as the actuarial equivalent
of the maximum permissible at age 65, the guaranteed pension of
a young disabled retiree could be severely limited. The UAW

believes that, since disabled workers do not choose to retire

early, their guaranteed pensions should be determined as if they had reached age 65.

Single employer plan participants who are affected by partial terminations and participants in multiemployer plans whose employer withdraws from participation are not adequately protected by Title IV. In both situations plan participants should be given the same guarantees as are provided for participants in the event of total plan terminations.

Qualified Joint and Survivor Annuities for Disability Retirees:

The Internal Revenue Service requires that a Qualified Joint and Survivor Annuity must be provided only if a worker retires after reaching his "qualified early retirement age". If disability retirement occurs before attainment of the "qualified early retirement age", the Qualified Joint and Survivor Annuity should become effective when he reaches that age. We also suggest that it should be possible to mandate that the coverage for workers who have reached their "qualified early retirement age" should be provided at no cost. Many actuaries believe that the charges made against pensions for this coverage are probably overstated. In addition, the administrative cost of notifications, elections, etc., may exceed the value of the reductions.

Investment of Pension Funds:

Because of the strict fiduciary requirements of ERISA, there has been much discussion about the conservative investment policies of employee benefit plan trustees. Recent regulations from the Department of Labor should allay some of the concerns of trustees. If Congress considers easing the standards for a portion of plan funds, the UAW believes that any changes should enable trustees to invest in such socially desirable areas as health maintenance organizations, day care centers, etc.; an amendment to the law might be contemplated which would provide that a certain portion of the fund, e. g., 5% could be allocated to socially desirable investments without being subject to the full effect of the prudent man rule. In the same vein, the prohibition against a plan providing mortgages to the participants could also be lifted. Encouragement of Reciprocity between Plans in the Same Industry:

For many years UAW members in the aerospace industry have faced a serious problem. Because of the nature of the industry, they are forced to move from one company to another following government defense contracts. Therefore, a substantial number never earn vested pensions, although they work in the aerospace industry for many years. The UAW would strongly support any attempts by Congress to establish industry-wide pensions to encourage reciprocal pension credit arrangements between employers in the same industry.

Possibility of Other Major Changes in Mandated Provisions:

In general, while the UAW would like to see companies improve their plans substantially, we believe that mandating significant new protections in defined benefit plans can only lead to continued acceleration of terminations of these plans. There are already many reasons why companies prefer to adopt defined contribution plans to the detriment of their workers. Therefore, we have to take the position that major improvements should be left to the discretion of employers and, where appropriate, unions rather than mandated by Congress.

SEC Jurisdiction over Pension Plans:

Unless the Seventh Circuits decision in Daniel v. International Brotherhood of Teamsters is overturned, we believe it would be wise to clarify in a revision to ERISA that pensions should not be subject to federal or state securities laws. Now that participants in pension plans have the protections provided by ERISA, this extra level of protection should not be necessary and will simply encourage additional litigation and

administrative problems for plans.

Coverage of Multiemployer Plans Under Title IV of ERISA

We understand that the Pension Benefit Guaranty Corporation will shortly be making proposals regarding the changes which they believe will be necessary for multiemployer plans. Therefore, we are not making specific recommendations at this time. In general, however, we believe that experience since the passage of ERISA has shown that multiemployer plans should not be required to meet lesser standards than single employer plans.