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Transportation Communications International - AFL-CIO [1]
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FOIA Number: 2013-0306-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Chief of Staff
Series/Staff Member:
Jennifer O'Connor
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OA/ID Number:
8146
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Transportation Communications International - AFL-CIO [1]
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22
5
5
2
SEP 27 '95 03:43PM DOT/OST PUBLIC AFF.
P.1/7
File
U. S. Department of Transportation
Union
Office of Public Affairs
Room 10414
400 Seventh Street, S.W.
Washington, D.C. 20590
(202) 366-4570
Date
9/27
From:
Scott Dykan
To:
sermifer 0' Connor
Fax:
456-7929
Pages:
6
following this cover sheet
Comments: Fund verson of Dann Pena
remuter to TTO department
This fax originated at (202) 366-6337. Please call Constance Gray
at (202) 366-4570 if there were any problems in transmission.
SEP 27 '95 03:43PM DOT/OST PUBLIC AFF.
P.2/7
News:
U.S. Department of
Transportation
Office of the Assistant Secretary for Public Affairs
Washington, D.C. 20590
REMARKS PREPARED FOR DELIVERY
SECRETARY OF TRANSPORTATION FEDERICO PEÑA
TRANSPORTATION TRADES DEPARTMENT - AFL-CIO
SEPTEMBER 27, 1995
WASHINGTON, D.C.
Thank you, George Kourpias (International President, Machinists Union) for
those generous remarks. I'm very proud of our record.
And you should be, too. We've been lucky to have a leader like George.
He's been a key player as we've toiled to rebuild the airline industry over the last
few years.
Ron Cary (President, TTD), Ed Wytkind (executive director, TTD) it's good to
see you both again. And good to see so many familiar faces from all the affiliated
organizations.
Yes, a lot has changed in the industry, as you say George, and in the
American economy over the last few years.
The Cold War is over. We're no longer responding to outside enemies but
preparing for a global economy. We have more and more competition, more and
more technology. And we face, you face, who represent many of the people who
make up the backbone of our working families -- more opportunities and more
challenges.
I'm here today to tell you we can, together, work to meet the economic
challenges of our time. We've been doing that over the last 2 1/2 years and will
keep working to make sure America is the leader in the global economy. And I
know it can't be done alone, which is why we've been actively involved in
addressing labor union issues unlike prior administrations.
This Administration -- President Clinton and I -- came to office with a
different view of labor relations. What we believe is that the key to America's
competitiveness is the performance and productivity of our workforce, and central
to that is skilled union labor.
- more -
SEP 27 '95 03:43PM DOT/OST PUBLIC AFF.
P.3/7
I
-2-
Instead of simply letting management and labor engage in serious disputes,
we supported a notion of more constructive labor-management dialogue.
Take the case of United Airlines. That was the first one we tackled. When I
got involved, the company was laying off workers, losing buckets of money like
many other carriers, bankruptcy was just around the corner. We encouraged the
unions and management to sit down and work out their differences. They did and,
in the process, crafted the biggest employee buyout in corporate history.
Today, United is profitable and not a casualty as many at the time thought
would happen. I fly United often, and you can just see the difference in employee
attitudes. They're not just happy and more productive workers; they're
stockholders with a stake in the company's future.
The United deal has set the tone for this Administration. I think the
approach is effective, benefiting workers, corporate America, and the overall
economy.
I know there's more to be done. My friend Bob Reich, I understand, will be
talking with you tomorrow and he can bring you up to date with our efforts to raise
the minimum wage -- it is plain wrong to expect people to work for $4.25 an hour
-- and to channel more federal resources into worker retraining.
Like President Clinton, I want a high-wage, high-growth, high-opportunity
country for all Americans. These are and must be our top priorities. A vibrant
economy like ours today is better than any remedy we can cook up here in
Washington.
Since day one, this Administration has worked overtime to bring the
economy back from recession. Had you held this convention 2 1/2 years ago and I
told you there would soon be over 7 million new jobs, the lowest unemployment
and inflation rates in years, 2.5 million new homeowners, 1.5 million new small
businesses, a record-breaking bull market on Wall Street and a cut in the deficit to
$160 billion, you'd probably have asked who my joke writer was. But we had a
major impact in all these changes.
Now, what about transportation? Virtually every market - aviation, trucking,
railroads -- by almost any measure is doing well. All are operating in the black.
Profitable companies don't lay off workers; they usually hire more workers and can
afford to pay them better.
- more -
SEP 27 '95 03:44PM DOT/OST PUBLIC AFF.
P.4/7
-3-
1 worked with union and management leaders in every one of these
industries.
Just last week, I met with bus manufacturers to see what could be done to
help turn things around in their industry. Look at shipbuilding. In 1993, U.S.
shipyards had exactly one order for a commercial ship. The President helped
shipyards up-grade technology. put and end to unfair foreign subsidies and made
loan guarantees possible. And for the first time since I was in high school, we're
building ships to export. I also hope we can persuade the Congress to support our
Maritime Security Act.
Is anyone here from the flight attendants association (Association of Flight
Attendants). 1 met with some. of you in July. We talked about a lot things,
including those new flight duty rules. I'm especially proud of what we did. You
asked for an end to those 18-hour work days some 15 years ago. I put it on my
radar screen, and the problem is now fixed.
You also mentioned what we did for American Airlines. Remember the 1993
strike against American Airlines, the year many travelling Americans nearly missed
their Thanksgiving Day dinners? I sure do. It was five days from hell. President
Clinton and I actively got involved to help settle the dispute. The end result:
American is profitable, and the strike was settled.
Is anyone here from the pilots union? Any machinists? (IAM) Transport
workers? (TWU).
Remember that late night meeting in my office two summers ago (July 1993)
when we worked out a plan to keep Northwest Airlines from going broke?
Management, the unions, and government officials as facilitators all put our heads
together and came up with a better answer than bankruptcy.
These are the kinds of things I'm talking about when 1 say we can and must
work together to fix our economic problems and prepare for the challenges ahead.
What about our Teamster friends. Any of you here today? Remember a
year ago last April? Some 70,000 Teamster truck drivers and dock workers went
on strike for 17 days. Secretary Reich and I worked with you. We listened to
your problems and helped moved the dispute into mediation. That's cooperation,
the kind we need to build an American economy for the future. A massive strike --
no matter how valid the reasons behind it -- makes havoc with the rest of this
complex, integrated economy of ours.
- more -
SEP 27 '95 03:44PM DOT/OST PUBLIC AFF.
P.5/7
-4-
1 also want to thank the Teamsters for the strong position you have taken
against provisions in the House National Highway System bill which would weaken
federal safety standards.
I say the focus has to be on the broader economy. Without the engine of
growth generating new jobs, and protecting existing ones, there is very little the
government can do in a $6 trillion economy. Yes, we as a government must
remain committed to worker friendly policies. I won't step away from the
American worker. But no one benefits if the overall economy goes in the tank, or if
a sector or particular region is in trouble. No one.
That's why we -- worker, manager, government policymaker -- must come
together and craft forward-looking solutions to problems. To understand the reality
and move ahead accordingly.
For one, we need free and fair trade. That's what the fight over Japanese
autos and auto parts was all about.
Another way to make certain our workers and businesses benefit from
expanding world trade is to pry open new markets. That's what I'll be doing in
November when I visit some of Asia's hottest emerging markets; looking for new
opportunities to sell American know-how and to make certain our workers can
compete there fairly.
Now I know we've had our differences over the North American Free Trade
Agreement (NAFTA). The important thing now is to make sure the agreement is
working properly. In the area of trucking, one of my main concerns is safety.
Our safety standards under NAFTA won't be compromised. We want to
attain the highest mutual safety standard with our Canadian and Mexican partners,
not a least common denominator. We agreed, for example, that drivers of trucks
and buses must have comparable safety and operating knowledge and skills in
order to be licensed - and that is working well.
Beginning in mid-December, when the cross-border markets open, a host of
driver and equipment safety standards take effect requiring foreign drivers to
comply with federal rules, such as financial responsibility, equipment specifications,
and hours-of-service.
We'll be working hard, in concert with the states, to enforce these tough
new standards. It's going to take some time, some getting used. But enforcing
these standards is a top priority.
- more -
SEP 27 '95 03:45PM DOT/OST PUBLIC AFF.
P.6/7
-5-
Now, there is one exception some of you may have heard about: driver drug
and alcohol testing. The same tough testing rules that domestic carriers must
follow also will be the rule of law for foreign truckers, but on a phased basis.
Since the decision to impose drug and alcohol testing on them was made just this
summer, it seems fair that foreign-based trucking firms be given as much time to
comply as our own U.S. industry.
Our "open skies" aviation policy will generate billions of dollars in new
economic activity and create tens of thousands of new jobs. An agreement
reached earlier this year with Canada, our most open and biggest market, is a net
job creator for America and alone will spur more than $15 billion in cross-border
activity. In the first six months of the year, U.S. (goods) exports to Canada
jumped 16 percent.
We've also just completed my program to win new aviation agreements with
9 European nations. We signed the ninth, and final, agreement earlier this month
with Belgium. These open skies agreements will make the U.S. airline industry
more competitive in the global marketplace which translates into more jobs for
American workers.
Now I've been talking quite a bit about the Administration's
accomplishments.
Despite what some have said about organized labor being on the ropes,
you've had your own share of victories, especially in preserving worker protection.
I know we worked closely with you on preserving the rights of workers to
bargain collectively. We've also worked with you in streamlining the 13(c)
process, which is a key labor protection program.
The transportation trades deserve much of the credit in blocking the effort to
repeal this labor protection program for transit workers. When the Coleman
Amendment to the House appropriations bill was introduced to remove language
which repealed 13(c), you won by a vote of 244-186.
Despite the sea change in Congress, lawmakers and voters aren't in the
mood to turn back the basic rights of workers.
An early sign of that came this summer. It didn't get a lot of attention.
Remember the assault on Davis-Bacon? What a victory that was, with labor,
Senate Democrats and the Administration all weighing in together to make sure
Davis-Bacon rules continued to apply to federal highway projects.
. more -
SEP 27 '95 03:45PM DOT/OST PUBLIC AFF.
P.7/7
-6-
And last week's vote by the House transportation committee on Amtrak
funding legislation was a breakthrough. Although we're not quite there yet, the bill
offers a win-win situation. First, the country wins through an adequately funded
and a more entrepreneurial Amtrak. And just as importantly, labor wins because
the bill doesn't dictate on the issues of contracting out and labor protection.
In FAA reform, we've strongly opposed congressional efforts to slash
"premium pay" for air traffic controllers. With your help, I think we can win this
one.
Now I've saved for last what I like doing best in this job -- making cash
awards to worthy projects. After careful consideration -- maybe a little too
carefully, it took some three years to decide -- I'm awarding $250,000 to the
International Association of Fire Fighters (IAFF).
This grant will fund a program to train 160 new instructors in handling
hazardous materials at accident sites. What pleases me most about making this
award today is the way it fits into the administration's overall economic strategy
which emphasizes training and education. 1 can't think of a better way to spend
the taxpayer's money.
Congratulations to the IAFF and your members.
####
NOV 09 '95 12:46PM DOT/SECRETARY OFFICE
P.2/3
or
DEPARTMENT
IMMIRORIATION
w
THE DEPUTY SECRETARY OF TRANSPORTATION
WASHINGTON, D.C. 20590
LIMITED STATES of AMERICA
November 7, 1995
300
MEMORANDUM TO:
Harold Ickes
Labi, truns
mispitan and
Deputy Chief of Staff
FROM
:
Mortimer Downey
SUBJECT
:
Personnel Reform
The FY 1996 DOT Appropriations Act language on personnel reform exempts the FAA from
all provisions of civil service law except for a short list of enumerated provisions. The short
list did not include Chapter 71 under which the FAA grants recognition to organized
bargaining units. While this does not preclude the FAA from continuing to recognize and
deal with the unions currently representing agency employees, it leaves that recognition to
the discretion of the agency. It is this discretionary nature of recognition that is vehemently
opposed by the National Air Traffic Controllers Association (NATCA) and other unions which
represent FAA employees. The McCain-Ford Bill supported by the Administration explicitly
continues the applicability of Chapter 71 to the FAA. When NATCA brought this issue to the
attention of the Department on October 18, we supported an attempt by House Democrats to
include coverage by Chapter 71 in the Appropriations language. Unfortunately, this attempt
failed because of Republican opposition. Secretary Pena wrote to Barry Krasner of NATCA
on October 20 stating DOT's position of support for continued FAA coverage by Chapter 71.
It is our intent, as the FAA Administrator moves forward to implement a new personnel
system as permitted by the Appropriations Act, to continue to recognize and support the
existing labor-management framework in the same way we would if Chapter 71 were
applicable.
NOV 09 '95 12:47PM DOT/SECRETARY OFFICE
KIT
P.3/3
DEPARTMENT of
THE SECRETARY OF TRANSPORTATION
UNITED STATES OF FAMERICA
WASHINGTON, D.C. 20590
October 20, 1995
Mr. Barry Krasner
President, National Air Traffic
Controllers Association
1150 - 17th Street, NW, Suite 701
Washington, DC 20036
Dear Barry:
As you know, the Clinton Administration and the Congress are currently pursuing several
avenues to achieve Federal Aviation Administration (FAA) reform. Several of the
legislative initiatives grant the FAA authority to establish a new personnel system in some
areas, while preserving coverage by Title V of the U.S. Code in other areas.
The Clinton Administration has voiced strong support for the FAA reform proposal
introduced by Senators McCain, Ford and Hollings. One very important aspect of their
bill is its preservation of the statutory framework for labor-management relations,
Chapter 71 of Title V, within FAA. We believe that the preservation of this framework is
a necessary component of any reform legislation.
Also, we supported and worked to preserve Premium Pay for Controllers, and the
Conference Committee agreed to retain Premium Pay.
It indeed is unfortunate that you did not raise the DOT FY 96 appropriations bill language
with me until Wednesday, October 18, the day the conferees considered this issue. I
immediately went to work on this issue but, despite our efforts, we were unable to
convince the conferees to clarify the Chapter 71 issue.
The conferees included in the Statement of Managers language that makes it clear that no
labor organizations are to be disenfranchised by the personnel reform provisions. We
strongly support this language. You can be assured that we will continue to recognize and
support the existing labor-management statutory framework.
Sincerely,
Jedisico Pens
Federico Peña
Joshaa - -
9/12
patience No Presidentin
Thanks for your
response seat on this
Both ORM+ Quorum
files show Harold
(copies attached)
was going to respond
/
P.S. Did you eder
tack to Steve Horn
(66557) about getting
hooked up to Quorum?
Thank : Jan 65914
Sent to LORi 4/15
-
05/10/95 14:14
202 857 4245
AA Govt Affairs
001/003
Trans
12451
May 10, 1995
To:
Harold Ickes
From:
Debbie Willhite
Per our discussion.
5/14
Jenn O'
who (maybe this H! you)
62242
Find is should involved out all in any draft
response
J
9/6
POTUS responded HI vkd final
as per Jenn 0'
John- Set copy of POTUS response
9/15- - show to Jenn 0'- see attachments
05/10/95
14:15
6202 857 4245
AA Govt Affairs
002/003
Transport Workers Union of America
vanerica
Affiliated with American Federation of Labor and Congress of Industrial Organizations
MATTHEW GUIMAN
80 WEST END AVENUE
NEW YORK, N.Y. 10023
PHONE: 212 873-6000
FAX: 212 721-1431
Int'l President Emeritus
GEORGE E. LEITZ
Intl President Emenue
SONNY HALL
May 10, 1995
international President
FRANK McCANN
Int'l Exac. Vice Presidery
The Honorable William Clinton
JOHN J. KERRIGAN
President of the United States
the'l Secretary-Trapsurer
The White House
Washington, D.C.
EXECUTIVE COUNCIL
Dear Mr. President:
Vice Presidents
MICHAEL BAKALO
MARION FINLEY
On behalf of the sixty thousand airline workers
PAUL GAYNOR
represented by the Transport Workers Union of America, I
JAMES MOOD
WILLIE JAMES
want to express my grave concern that the United States may
EDWARD KOZIATEK
be about to waive the Fly America Act in the largest
HARRY LOMBARDO
international aviation market in the world -- the U.S. -
THOMAS MeADAM
JULIA MEMILEON
United Kingdom. If true, this is a severe blow to our
LARRY MARTIN
FRANCIS D'BRIEN
airline members and their families. I urge you in the
MICHAEL D'BRIEN
strongest possible terms, to reverse this decision before it
PEDRO QUINOMES
is finalized.
GEORGE ROBERTS
DAMASO SEDA
The Fly America Act exists to make certain that U.S.
Cauncil Members
government employees fly on U.S. airlines whenever possible.
SOHN BLAND
DENNIS CALMOUN
This is a widely accepted policy that has helped U.S.
RAY CAMPBELL
carriers to maintain strength in the international markets
DENNIS GERMAN
JAMES MINALICS
which, in turn, benefits U.S. airline labor. Last month
STEVE MOWERT
during intense negotiations, the United Kingdom demanded
RICHARD SCATTONE
ROGÉR TAUSS
that its carriers be allowed to receive waivers from this
KAY WALLACE
requirement and participate in U.S. government traffic. At
the time, we were pleased that the U.S. negotiators stood
firm on this issue.
EXECUTIVE BOARD
STEVE BROOKENS
But now, apparently, the Departments of Transportation
SIMIEL CAMPBELL
and State have backed down and are prepared to give the
JOSEPH CASTORIMA
ANTHONY CORONA
British the authority to bid for this traffic by using U.S.
JACK CRONIN
carrier codes. This obviously does not change the effect of
FRED Dalla TORRE
PETER DEMPSET
the waiver. U.S. government tax dollars will be going to
WILLIAM ERMST
pay for services by British carriers when there are many
JOE GORDON
JAMES JEFFERSON
U.S. carriers serving these markets that could handle the
HERBERT JONES
business--carriers that employ U.S. workers, and fly U.S.
at KUNKLE
JOHN LANE
manufactured planes, maintained and serviced in the United
CHARLES LITTLE
States. This would 80 undercut the Fly America Act as to
JAMES,LITTLE
GEORGE MEDONALD
make it meaningless.
THOMAS F. MAMAN, III
JOHN MALLERY
AL MAYES
JOHN MIRRIONE
RICHARD PLOCINSKI
JAMES RO96
MARSHA SPINOWITZ
05/10/95 14:15 202 857 4245
AA Govt Affairs
003/003
The Honorable William Clinton
May 10, 1995
Page 2
We simply can't believe that this represents the
position of the Clinton/Gore Administration. Accordingly,
we ask you to stop the negotiations with the British until
this issue is off the table once and for all.
Sincerely,
Sony Hall
Sonny Hall
President, Transport Workers
Union of America, AFL-CIO
SH:mjm
CC: The Honorable Federico Pena
Harold Ickes
Kitty Higgins
SCREEN COPY FOR USER JANV PRINTED ON 11:09:03 Sep 12 1995
Constituent.Summary.View
Record: 1311490.A
Revised: 11 Sep 95
Entered: 20 Oct 93
Mr. Sonny Hall
Contact.Aide.Type
Code
Status
311679 pak HRC.S DC HEALTH LEGISLAT OPEN
No home address
International President
Transport Workers Union of
America
80 West End Avenue
History.Aide.DateIn/Out
Letter/Subject
New York, NY 10023
2322460 ems 27 Jun 95
LOGGED
27 Jun 95
NOANS.N
No additional information
2181011 bh
14 Apr 95
/ma/robo/jd/jd-013
14 Apr 95
VIEWS.N
No affiliations
1668536 pak
11 Jul 94
/hrc/schedule/wt.re
11 Jul 94
1101801 sem
20 Oct 93
/.archive/texts_typ
28 Oct 93
Group:
Quorum
SCREEN COPY FOR USER JANV PRINTED ON 11:09:10 Sep 12 1995
Corresp# : 2322460
Correspondence History
Contact#
:
Aide. : ems
Env :
Batch:
Open :
List :
Text : LOGGED
File# :
:
Disp. :
Count: 1
:
Subjects
Pos
Close :
NOANS
N Etc :
:
:
Enclosures
Descriptions
In. Date LetterDate LoadDate Hom/Bus Lab/Env
06/27/95 06/27/95 06/27/95
H
Comments
NRN-Harold Ickes responding-incoming sent
Status
Date
User
to central files
LOGGED
06/27/95 ELLYS
ENTERED
06/27/95 ems
Using. Information
111387
CA004
NPN-
HIERS A
Vespnois
TRACKING SHEET
Date
Initial
RECEIVED BY PLM
5/19 SP
DRAFT WRITTEN
EDITED IN PLM
FORMATTED BY TYPING
REVIEWED ON WHITE
PRINTED ON AZURE
APP. BY REVIEW UNIT
APP. FOR SIGNATURE
23 Hrs:
Fly America Act
u.s.-u.k
ORM
WORKERS
111387
Transport Workers Union of America
Affiliated with American Federation of Labor and Congress of Industrial Organizations
MATTHEW GUINAN
80 WEST END AVENUE
NEW YORK, N.Y. 10023
PHONE: 212 873-6000
FAX: 212 721-1431
int'l President Emeritus
GEORGE E. LEITZ
inti President Emeritus
SONNY HALL
May 10, 1995
International President
CO
P
FRANK McCANN
Int'l Exec. Vice President
The Honorable William Clinton
JOHN J. KERRIGAN
President of the United States
from ORM
Inil Secretary Treasurer
The White House
Washington, D.C.
EXECUTIVE COUNCIL
Dear Mr. President:
Vice Presidents
MICHAEL BAKALO
MARION FINLEY
On behalf of the sixty thousand airline workers
PAUL GAYNOR
represented by the Transport Workers Unicn of America, I
JAMES HOOD
WILLIE JAMES
want to express my grave concern that the United States may
EDWARD KOZIATEK
be about to waive the Fly America Act in the largest
HARRY LOMBARDO
THOMAS McADAM
international aviation market in the world the U.S. -
JULIA McMILLON
United Kingdom. If true, this is a severe blow to our
LARRY MARTIN
FRANCIS O'BRIEN
airline members and their families. I urge you in the
MICHAEL OBREN
strongest possible terms, to reverse this decision before it
PEDRO QUINONES
GEORGE ROBERTS
is finalized.
DAMASO SEDA
The Fly America Act exists to make certain that U.S.
Council Members
government employees fly on U.S. airlines whenever possible.
JOHN BLAND
DENNIS CALHOUN
This is a widely accepted policy that has helped U.S.
RAY CAMPBELL
carriers to maintain strength in the international markets
DENNIS GERMAN
JAMES MIHALICS
which, in turn, benefits U.S. airline labor. Last month
SIEVE MOWERY
during intense negotiations, the United Kingdom demanded
RICHARD SCATTONE
ROGER TAUSS
that its carriers be allowed to receive waivers from this
KAY WALLAGE
requirement and participate in U.S. government traffic. At
the time, we were pleased that the U.S. negotiators stood
firm on this issue.
EXECUTIVE BOARD
STEVE BROCKENS
But now, apparently, the Departments of Transportation
SIMIEL CAMPBELL
and State have backed down and are prepared to give the
JOSEPH CASTORINA
ANTHONY CORONA
British the authority to bid for this traffic by using U.S.
JACK CRONIN
carrier codes. This obviously does not change the effect of
FRED DALLA TORRE
PETER DEMPSEY
the waiver. U.S. government tax dollars will be going to
WILLIAM EANST
pay for services by British carriers when there are many
JOE GORDON
JAMES JEFFERSON
U.S. carriers serving these markets that could handle the
HERBERT JONES
business--carriers that employ U.S. workers, and fly U.S.
AL KUNKLF
JOHN LANE
manufactured planes, maintained and serviced in the United
CHARLES LITTLE
States. This would SO undercut the Fly America Act as to
JAMES LITTLE
GEORGE McDONALD
make it meaningless.
THOMAS F MAHAL III
JOHN MALLERY
AL MAYES
JOHN MIRRIONE
RICHARD PLOCINSKI
JAMES RUSS
MARSHA SPINOWITZ
The Honorable William Clinton
May 10, 1995
Page 2
We simply can't believe that this represents the
position of the Clinton/Gore Administration. Accordingly,
we ask you to stop the negotiations with the British until
this issue is off the table once and for all.
Sincerely,
Sony Hall
Sorny Hall
President, Transport Workers
Union of America, AFL-CIO
SH:mjm
CC: The Honorable Federico Pena
Harold Ickes
"
Kitty Higgins
copyBeye
TRANSPORTATION COMMUNICATIONS
TCU
ROBERT A. SCARDELLETTI
INTERNATIONAL UNION
International President
HOWARD W. RANDOLPH, JR.
International Vice President and
AFL-CIO, CLC LEGISLATIVE DEPARTMENT
National Legislative Director
TONY PADILLA
Assistant National Legislative Director
December 14, 1995
Mr. Harold Ickes
Deputy Chief of Staff for
Policy and Political Affairs
Office of the President of the U.S.
The White House
1600 Pennsylvania Avenue, N.W.
Washington, D.C. 20500
Dear Mr. Ickes:
As follow-up to our meeting of October 6, 1995, I have enclosed a copy of a letter
written by John Sweeney, President, American Federation of Labor and Congress of
Industrial Organizations (AFL-CIO).
As we discussed, the Transportation Communications International Union
(TCU), which represents over 100,000 rail workers, provided an automatic retiree
COLA based on erroneous actuarial information. This COLA threatens the solvency
of TCU and will eventually lead to a declaration of bankruptcy of the Union.
I have enclosed copies of the information that we provided to you during our
meeting. It is imperative that legislative language that resolves this problem be
incorporated into a tax package that will be signed by President Clinton. On behalf
of TCU, I would like your support.
If you have any questions, please do not hesitate to contact me. In advance, I
thank you for your attention to this matter.
Sincerely,
RA Saulelletti Robert A. Scardelletti
International President
Enclosures
AFL-CIO Bldg. - 5th Floor
815 - 16th Street, N.W.
Washington, D.C. 20006
(202) 783-3660
FAX (202) 783-0198
American Federation of Labor and Congress of Industrial Organizations
EXECUTIVE COUNCIL
MERICAM FEDERATION OF LABOR
815 Sixteenth Street, N.W.
JOHN J. SWEENEY
RICHARD L. TRUMKA
LINDA CHAVEZ-THOMPSON
Washington, D.C 20006
PRESIDENT
SECRETARY-TREASURER
EXECUTIVE VICE PRESIDENT
(202) 637-5000
Albert Shanker
Edward T. Hanley
Wayne E. Glenn
James E. Hatfield
AFL
CIO
Vincent R. Sombrorto
Gerald W. McEntee
William H. Bywater
Marvin J. Boede
CONGRESS
John T. Joyce
Morton Bahr
Robert A. Georgine
Gene Upshaw
ORGANIZATION
Jay Mazur
Lenore Miller
John J. Barry
Moe Biller
George J. Kourpias
John N. Sturdivant
Frank Hanley
James J. Norton
OF
Michael Sacco
Ron Carey
Arthur A. Coia
Frank Hurt
INDUS
TRIAL
Gloria T. Johnson
Douglas H. Donty
George F. Becker
Stephen P. Yokich
Capt. J. Randolph Babbitt
Clayola Brown
Richard W. Cordtz
M.A. "Mac" Fleming
Carolyn Forrest
Pat Friend
Michael Goodwin
Joe L. Greene
Sonny Hall
Sumi Haru
Carroll Haynes
James LaSala
William Lucy
Leon Lynch
Doug McCarron
Andrew McKenzie
A.L. "Mike" Monroe
Arthur Moore
Arturo S. Rodriguez
Robert A. Scardelletti
Robert E. Wages
Jake West
Alfred K. Whitehead
December 14, 1995
Senator Alfonse M. D'Amato
United States Senate
520 Senate Hart Office Building
Washington, D.C. 20510-3202
Dear Senator D'Amato:
As you are aware, the AFL-CIO has been supporting the
Transportation. Communications International Union (TCU) in its
efforts to correct the decision of its former Trustees in approving
an automatic COLA on retiree benefits covering its officers and
staff. This decision was based on demonstrably erroneous actuarial
advice that this benefit could be provided without any increase in
contributions. This action has, in fact, created a major burden on
TCU, threatening the financial viability of this union.
TCU represents over 100,000 rail workers employed by our
nation's railroads, including the following major carriers serving
New York State -- Metro North, Long Island Rail Road, PATH, New
Jersey Transit, Amtrak and ConRail. The bankruptcy of TCU would be
a tragedy not only for that union and its members, but the entire
labor movement. It would undoubtedly result in significant labor
unrest to the detriment of our nation's rail carriers and the
public they serve.
I, therefore, was extremely pleased to learn of your
commitment to assist TCU in resolving this problem through an
appropriate legislative vehicle and wanted to thank you for your
support.
Sincerely
John J. Sweeney
President
cc: Michael Kinsella, AA
Susan Nassar, LA
R. A. Scardelletti, IP
SEP 30 '95 03:19PM SEN BAUCUS-WASH DC
P.2/?
vos PACKWOOD OREGON CHAWSAN
soe COLE. KANSAS
DAMIL PATINCK MOYNMAN new YORK
WILLIAMS V. ROTM. M. BELAWARE
MAX MUCUS. MONTANA
JORN a, ONCE EMBOR BLAND
one MADLET. NEW JERSEY
CHARLESE GRABBLEY. IOWA
DAVID PRYOR ARKANSAS
ORGAN 6. MAPINE UTAM
JOHN a ROCKEFELLER 10, WEST VORGINIA
ALAM a INVOICE WYOMING
JOHN BREAUE LOUISIANA
LARRY RETELER SOUTH DAKOTA
RENT CONRAD NORTH DAKOTA
ALPONESE M OTAMATO. NEW YORK
see GRAMAN, FLORIDA
United States Senate
FRAME M MURKOWSEL ALABRA
CAROL MOSELEY BRAUN BUNDIE
DON ANCELES. ORLANOMA
COMMITTEE ON FINANCE
LINDYL PAULL THE DIRECTOR AND CHIEF COUNSEL
WASHINGTON, DC 20510-6200
LAWRINGS O'DONNELL . INNORITY STAMP DIRECTOR
September 29, 1995
The Honorable William V. Roth, Jr.
Chairman
Senate Finance Committee
Washington, D.C. 20510
Dear Mr. Chairman,
I am writing to you to request inclusion of language in your
pending Chairman's Mark relating to the tax provisions for the 1995
budget reconciliation bill.
The language which is set our at TAB A, would provide relief
for the Transportation Communications International Union ("TCU")
by relieving it of the obligation to provide future COLA increases
to its staff retirement beneficiaries.
Joint Tax in a letter dated June 14, 1995, estimated that the
proposal "would have a negligible effect on Federal fiscal year
budget receipts." The Joint Tax letter is at TAB B. In other
words, Mr. Chairman, providing relief to TCU on this matter would
have no cost impact on the fisc.
TCU 19 entitled to relief because the adoption of the COLA was
based on demonstrably and clearly erroneous actuarial advice.
TCU's Union Staff Retirement Plan (the "Plan") was established
in 1955. Until 1990, the Plan did not provide A COLA
In October of 1990, the Plan Trustees approved an automatic
COLA based on the advice of its actuary that such a benefit could
be granted without any increase in contributions by Plan
participants.
In the summer of 1992, William M. Mercer, Inc. ("Mercer") was
retained by the Plan Trustees to act as the actuary to TCU's Plan.
In making the 1993 actuarial valuations, Mercer advised the
Trustees that the COLA could not be funded without significantly
increasing contributions.
Following receipt of Mercer's actuarial valuations, TCU
amended the Plan to aliminate COLA's on benefits accruing for
active employees after May 14, 1993. Mercer has concluded that
even after the May 14, 1993 Plan amendments, the COLA benefit which
continued to accrue to retiree's under the Plan would require TCU
to raise its pension contributions by $2 million a year -- almost
SEP 30 '95 03:20PM SEN EAUCUS-WASH DC
P.3/7
doubling the level of contribution prior to the adoption of the
COLA.
TCU has concluded that such an increase in pension
contributions 18 not sustainable and that the Pension Benefit
Guaranty Corporation ("PBGC") may ultimately be required to assume
certain of the obligations of the Plan. A forecast prepared by
Deloitte & Touche LLP projecting the impact of the Plan's COLA on
TCU's future finances over five years shows that at the and of five
years, TCU will have spent all of its operating capital and have
incurred a debt of $1.4 million. A copy of the Deloitte Touche
forecast as well as the most recent valuation report prepared by
Mercer were provided to Finance Committee staff in June of this
year.
If the plan is to remain solvent, TCU requires legislative
relief which would permit TCU to eliminate future COLA benefits
accruing to beneficiaries cf the plan who had retired prior to May
14, 1993. The attached legislative language at TAB A would amend
Section 411 (d) (6) of the IRC and Section 204 (g) of ERISA to
accomplish that result.
TCU, in a letter dated July 26, 1995, addressed to Sarah Fox,
Chief Labor Counsel of the Senate Committee on Labor and Human
Resources, advised Ms. Fox that:
[TCU] has kept all Plan participants advised of the impact of
COLAs. We have received virtually no negative response from
retirees to our stated intent to discontinue future COLA
increases.
A copy of that letter, together with the notices that the Plan
provided to its retirees have been provided to the Finance
Committee Staff.
The Trustee's for the Plan have filed a lawsuit against the
prior actuary who certified that the COLA would not result in any
increase in contributions by the Plan's participants and against
the prior trustees who approved the COLA. Copies of the pleadings
and responses can be provided to you or the Finance Committee staff
upon request. TCU in its letter to Ms. Fox states that "even if
successful, it is not anticipated that any judgment will be
sufficient to cover the cost of the COLA."
My staff has been negotiating with Ms. Fox to determine
whether the Senate Committee on Labor and Human Resources will
exercise jurisdiction over the ERISA provisions contained in the
attached legislative language. I will advise you of the result of
those negotiations.
= am advised that the following persons at the Department of
Labor have reviewed the proposed legislative language at TAB A and
have no objection to its inclusion:
SEP 30 '95 03:2:FM SEN BAUCUS-WASH DC
P.4/7
Olena Berg, Assistant Secretary for Pension and Welfare
Benefits (219-8233),
Meredith Miller, Deputy Assistant Secretary for Policy
(219-8233), and
Alan D. Lebowitz, Deputy Assistant Secretary for Program
Operations (219-9048).
The Department of Labcr has forwarded the proposed language to the
Department of Treasury for their review and comment. I will advise
you of Treasury's response upon receipt of the same.
In summary, Mr. Chairman, I am firmly convinced that TCU is
entitled to the relief contained in the attached legislative
language. Joint Tax has concluded that enactment of the language
would have "negligible" revenue impact. Unless relief is obtained,
the PBGC may well be required to assume many of the payment
obligations under the plan -- to the detriment of the American
taxpayers.
= request, Mr. Chairman, that you give consideration to
including the legislative language get out at TAB A in your Mark
relating to the tax provision for the 1995 budget reconciliation
bill.
Sincerely,
Max Baucers
Max Baucus
SEP 30 '95 23:21PM SEN BAUCUS-WASH DC
P.5/?
O:\MAT\MAT9S.185
S.L.C.
104TH CONGRESS
IST SESSION
S.
IN THE SENATE OF THE UNITED STATES
Mr. BAUCUS introduced the following bill; which was read twice and referred
to the Committee on
A BILL
To waive certain requirements of the Internal Revenue Code
of 1986 and the Employee Retirement Income Security
Act of 1974 with respect to a plan amendment eliminat-
ing cost-of-living benefits.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 SECTION 1. APPROVAL OF PLAN AMENDMENT ELIMINAT-
4
ING COST-OF-LIVING BENEFITS.
5
(a) Iv GENERAL-The provisions of section
6 411(d)(6) of the Internal Revenue Code of 1986 and sec-
7 tion 204(g) of the Employee Retirement Income Security
8 Act of 1974 shall not apply to a qualified plan amendment
9 which provides for the elimination of cost-of-living adjust-
SEP 38 '95 03:21PM SEN BAUCUS-WASH DC
P.6/7
C:\MAT\MAT96.185
S.L.C.
2
1 ments to benefits under the plan which were provided pur-
2 suant to a plan amendment-
3
(1) which was approved on October 13, 1990,
4
and effective on January 1, 1991, and
5
(2) with respect to which the plan actuary gave
6
advice that the amendment would not result in an
7
increase in any required contribution to the plan.
8
(b) QUALIFIED PLAN AMENDMENT.-For purposes
9 of this section, the term "qualified plan amendment"
10 means a plan amendment which-
11
(1) is adopted before January 1, 1996, and is
12
effective on or after such date,
13
(2) is to a defined benefit plan established on
14
June 30, 1955, and
15
(3) does not reduce the amount of any benefit
16
being paid to any plan participant or beneficiary im-
17
mediately before the plan amendment is effective.
SEP 30 '95 03:21PM SEN BAUCUS-WASH DC
P.7/7
- CONGRESS. we
KENNETH J. KIRS
OF STAM
HOUSE
ISMATE
sas MEXIM TEAS.
100 Manwood OREHION,
MARY M. SCHMITT
CHAIRMAN
ACE CHARMAN
DEPUTY CHIEF OF STARS
PHILIP M. CRANE. FLUNDIE
WILLIAM V. BOTH " DELAVARE
LAW
APLLIAM M THOMAS ALIGORAM
JUN 8. MATCH UTAN
SAM M. GHESONS FLORIDA
DAMIEL PATRICK MOTHINAL 4/W YORK
Congress of the United
tates
BERNARD 4 SCHARTY
CHARLES #. RANGEL new YERK
DEPUTY Chell of STATE
MAS FAVOUS. MONTANA
JOINT COMMITTEE ON TAXATION
MEVENUE ANALYSIS
'015 LONGWORTH HOUSE OFFICE BUILDING
WASHINGTON, DC 20615-8463
(202) 225-3621
JUN : 1 1595
Honorable Max Baucus
United States Senate
Washington, DC 20510
Dear Senator Baucus:
This is in response to your request dated April 13, 1995,
for a revenue estimate of a proposal which would provide relief
for a specific plan from the provisions of Section 411(d) (6) of
the Internal Revenue Code of 1986 ("the Code").
Specifically, the bill would provide that a qualified
pension plan would not violate the rules relating to reductions
in accrued benefits (Code sec. 411 (d) (6) ) if the plan was amended
to eliminate cost-of-living adjustments to benefits under the
plan. The bill would apply only to defined benefit plans
established on June 30, 1955, that approved cest-of-living
adjustments on October 13, 1990, which were effective on
January 1. 1991. It is our understanding, from materials
provided by Roger Blauwet of your staff, that the intent of the
proposal is to provide relief to one particular plan, the
Transportation Communications International Union plan. The
revenue estimate is based on this understanding.
The proposal would be effective for plan amendments adopted
before January 1, 1996. We estimate that the proposal would have
a negligible effect on Federal fiscal year budget receipts.
I hope this information 19 helpful to you. If we can be of
further assistance in this matter, please let me know.
Sincerely
Kennech Kies
SENT BY:
3-6-96 ; 4:06PM ;
TCU-12024562464
Fill
1/
3
TRANSPORTATION COMMUNICATIONS
INTERNATIONAL UNION
TCU
Jen
the is Some Bill Burtz Status I this
ROBERT A. SCARDELLETTI
AFL-CIO, CLC
International President
TELECOMMUNICATION INFORMATION PAGE
PLEASE DELIVER THE FOLLOWING PAGES TO:
find w this she
st,
x
NAME:
Harold Ickes
LOCATION:
The White House
TELECOPIER NUMBER:
202/456-2464
FROM:
R. A. Scardelletti
Herdy's
DATE:
3/6/96
It's
MESSAGE:
attached.
huncf
49
TOTAL NUMBER OF PAGES:
3
(including information page)
For copies not received or unacceptable copies, please call
(301) 948-4910 and ask for
Ginny Dixon
3 Research Place Rockville, MD 20850 (301) 948-4910 FAX (301) 948-1369
SENT BY:
3- 6-96 ; 4:07PM ;
TCU-12024562464
;# 2/ 3
TRANSPORTATION
COMMUNICATIONS
INTERNATIONAL UNION
TCU
ROBERT A. SCARDELLETTI
AFL-CIO, CLC
International President
March 6, 1996
Mr. Harold Ickes
Assistant to the President
and Deputy Chief of Staff
The White House
Washington, DC 20500
Dear Mr. Ickes:
In regard to your letter of February 9, 1996, I am furnishing
you with a copy of a joint letter dated February 29, 1996, from
Senators Al D'Amato and Max Baucus, addressed to Senator William
Roth, Chairman, Senate Finance Committee, urging that TCU's request
for relief be included in any tax package drafted for consideration
by the Senate Finance Committee this year.
As discussed with you, your assistance is urgently needed and,
as always, appreciated.
Attachment
CC: Nell Hennessy, PBGC
Joseph Grant, PBGC
Linda Dorfee-Flaherty
3 Research Place Rockville, MD 20850 (301) 948-4910 FAX (301) 948-1369
SENT BY:
3- 6-96 ; 4:07PM ;
TCU-12024562464
;# 3/ 3
Hnited States Senate
WASHINGTON, DC 20810
Fabruary 29, 1996
The Honorable William V. Roth, Jr.
Chairman
Senate Finance Committee
Washington, D.C. 20510
Dear Mr. Chairman,
In the event a tax package is drafted for consideration by, the
Finance Committee or the full Senate this year. we request that you
give consideration to including language which would provide relief
=0 the Transportation Communications International Union (TCU) from
certain "Plan"). obligations under its qualified retirement plan (the
Simply stated, Mr. Chairman, former trustees of the Plan
approved an automatic COLA on retiree benefits based on erroneous
actuarial advice that the COLA increases could be provided without
any increase in contributions to the Plan. Contrary to the
actuarial advice, the COLA increases now threaten the financial
viability of TCU.
The legislative language which 10 attached to this
correspondence would relieve TCU of the obligation to provide
future COLA increases to ics staff retirement beneficiaries.
Joint Tax in a letter dated June 14, 1995. estimated that the
attached legislative language "would have a negligible effect on
Federal fiscal year budget receipts."
We have also attached to this correspondence a letter Max sent
you in September of lest year explaining the TCU matter in greater
detail. The letter notes that TCU has had discussions with the
Department of Labor on this matter. We have been advised that TCU
has recently met with the Pension Benefit Guaranty Corporation and
that the PBGC supports a legislative solution to TCU's problem.
We thank you, Mr. Chairman. for your consideration of our
request. We look forward to working with you in structuring a tax
package for consideration by the Committee and the Senate.
Max Bause
Saucus
Alfonse M. D'Amaco
Enclosures
THE WHITE HOUSE
WASHINGTON
9 February 1996
Mr. Robert A. Scardelletti
International President
Transportation Communications
Legislative Union
AFL-CIO Building - 5th Floor 815
16th Street, N.W.
Washington, D.C. 20006
Dear Mr. Scardelletti:
Thank you for your 14 December 1995 letter about the proposed
legislation regarding the ability of TCU to eliminate the
automatic COLA in the pension plan for its staff employees.
I have referred your proposal for analysis to the Department of
the Treasury, and they are reviewing it. Please be assured that
we will take your views into consideration as part of our review
of any legislative proposals on this issue by Congress.
Thank you again for writing.
Sincerely,
A
Harold Ickes
Assistant to the President
and Deputy Chief of Staff
CC: Bill Burtz (Treasury)
TRANSPORTATION COMMUNICATIONS
TCU
ROBERT A. SCARDELLETTI
INTERNATIONAL UNION
International President
HOWARD W. RANDOLPH, JR.
International Vice President and
AFL-CIO, CLC LEGISLATIVE DEPARTMENT
National legislative Director
TONY PADILLA
Assistant National Legislative Director
December 14, 1995
Mr. Harold Ickes
Deputy Chief of Staff for
Policy and Political Affairs
Office of the President of the U.S.
The White House
1600 Pennsylvania Avenue, N.W.
Washington, D.C. 20500
Dear Mr. Ickes:
As follow-up to our meeting of October 6, 1995, I have enclosed a copy of a letter
written by John Sweeney, President, American Federation of Labor and Congress of
Industrial Organizations (AFL-CIO).
As we discussed, the Transportation Communications International Union
(TCU), which represents over 100,000 rail workers, provided an automatic retiree
COLA based on erroneous actuarial information. This COLA threatens the solvency
of TCU and will eventually lead to a declaration of bankruptcy of the Union.
I have enclosed copies of the information that we provided to you during our
meeting. It is imperative that legislative language that resolves this problem be
incorporated into a tax package that will be signed by President Clinton. On behalf
of TCU, I would like your support.
If you have any questions, please do not hesitate to contact me. In advance, I
thank you for your attention to this matter.
Sincerely,
Robert A. Scardelletti
International President
Enclosures
AFL-CIO Bldg. - 5th Floor
815 - 16th Street, N.W.
Washington, D.C. 20006
(202) 783-3660
FAX (202) 783-0198
02/08/96 15:21
9 202 6220073
TREAS EXEC SEC
001
DEPARTMENT OF THE TREASURY
12LDLE TERMS
WASHINGTON, D.C. 20220
its's
FAX TRANSMITTAL SHEET
DATE: 2/8/96
NUMBER OF SHEETS TO FOLLOW:
TO: Sennifer 456-2883 O' O'Connor
ADDRESSEE'S FAX #:
ADDRESSEE'S CONFIRMATION #:
FROM:
R. Benjamin nye
SENDER'S FAX #: 202-622-0073
SENDER'S CONFIRMATION #: 202-622-1700
SPECIAL INSTRUCTIONS/COMMENTS:
02/08/96
15:21
69 202 6220073
TREAS EXEC SEC
002
COMMITMENT
at
THE
DEPARTMENT OF THE TREASURY
TREASURY
WASHINGTON
1789
February 8, 1996
MEMORANDUM FOR JENNIFER CONNOR
THE WHITE HOUSE
FROM:
J. BENJAMIN H. NYE
EXECUTIVE SECRETARY
SUBJECT
Reply to TCU President Scardelletti regarding
legislative proposals to eliminate pension plan
COLA
Attached is the draft language you requested for Harold Ickes'
reply to a letter from Mr. Robert A. Scardelletti, International
President, Transportation-Communications International Union,
requesting Administration support for legislation that would
permit the union to eliminate a pension cost-of-living benefit it
had previously granted its retirees.
It is generally viewed as inappropriate for the Adminístration to
affirmatively support tax legislation narrowly targeted to
benefit a specific plan. This proposed "rifle-shot" exception to
the worker protection provisions of the Internal Revenue Code and
ERISA is also not the type of provision that would be appropriate
to be included in a budget proposal.
We are in fact currently studying this proposal but we have
concerns about the appropriateness of using legislation to
resolve this issue, particularly given the pending court case.
It is conceivable that a fact-specific dispute such as this would
be better addressed by the courts, who are better situated to
examine the underlying facts of the case. We also want to weigh
the fact that there may be other cases raising similar problems
(union penion trustees granting COLAS for retirees shortly before
their own retirement) and that the future benefits of rank and
file retirees would be reduced under the proposed solution.
Attachment
Staff contact: Bill Bortz
Attorney-Advisor
Office of the Benefits Tax Counsel
622-1332
02/08/96
15:22
69 202 6220073
TREAS EXEC SEC
003
Mr. Robert A. Scardelletti
International President
Transportation-Communications International Union
AFL-CIO Building, Fifth Floor
816 Sixteenth Street, N.W.
Washington, D.C. 20006
Dear Mr. Scardelletti:
Thank you for your letter concerning the proposed legislation
regarding the ability of TCU to eliminate the automatic COLA in
the pension plan for its staff employees.
I appreciate hearing your concerns. The proposal has been
referred for analysis to the Department of the Treasury. Please
be assured that we will take your views into consideration as
part of our review of any legislative proposals on this issue by
Congress.
Thank you again for writing.
Sincerely,
American Federation of Labor and Congress of Industrial Organizations
EXECUTIVE COUNCIL
AMERICAN FEDERATION OF LABOR
815 Sixteenth Street, N.W.
JOHN J. SWEENEY
RICHARD L. TRUMKA
LINDA CHAVEZ-THOMPSON
Washington, D.C 20006
PRESIDENT
SECRETARY-TREASURER
EXECUTIVE VICE PRESIDENT
(202) 637-5000
Albert Shanker
Edward T. Hanley
Wayne E. Glenn
James E. Hatfield
AFL
CIO
Vincent R. Sombrotto
Gerald W. McEntee
William H. Bywater
Maryn J. Boede
CONDRESS
John T. Joyce
Morton Bahr
Robert A. Georgine
Gene Upshaw
m
Jay Matur
Lenore Miller
John J. Barry
Mos Baller
George J. Kourpias
John N. Sturdivant
Frank Hanley
James J. Norton
OF
Michael Sacco
Ron Carey
Arthur A. Coul
Frank Hurt
INDUSTRIAL
Gloria T. Johnson
Douglas H. Donty
George F. Becker
Stephen P. Yoloch
Capt J. Randolph Babbitt
Clayola Brown
Richard W. Cordtz
M.A. "Mac" Fleming
Carolyn Forrest
Pat Friend
Michael Goodwin
Joe L Greene
Sonny Hall
Sum Haru
Carroll Haynes
James LaSale
William Lucy
Leon Lynch
Doug McCarron
Andrew McKenzie
AL "Mike" Monroe
Arthur Moore
Arturo S. Rodriguez
Robert A. Scardelletti
Robert E. Wages
Jake West
Alfred K. Whitehead
December 14, 1995
Senator Alfonse M. D'Amato
United States Senate
520 Senate Hart Office Building
Washington, D.C. 20510-3202
Dear Senator D'Amato:
As you are aware, the AFL-CIO has been supporting the
Transportation:Communications International Union (TCU) in its
efforts to correct the decision of its former Trustees in approving
an automatic COLA on retiree benefits covering its officers and
staff. This decision was based on demonstrably erroneous actuarial
advice that this benefit could be provided without any increase in
contributions. This action has, in fact, created a major burden on
TCU, threatening the financial viability of this union.
TCU represents over 100,000 rail workers employed by our
nation's railroads, including the following major carriers serving
New York State -- Metro North, Long Island Rail Road, PATH, New
Jersey Transit, Amtrak and ConRail. The bankruptcy of TCU would be
a tragedy not only for that union and its members, but the entire
labor movement. It would undoubtedly result in significant labor
unrest to the detriment of our nation's rail carriers and the
public they serve.
I, therefore, was extremely pleased to learn of your
commitment to assist TCU in resolving this problem through an
support. appropriate legislative vehicle and wanted to thank you for your
Sincerel
John J. Sweeney
President
cc: Michael Kinsella, AA
Susan Nassar, LA
R. A. Scardelletti, IP
SEP 30 '95 03:19PM SEN BAUCUS-WASH DC
P.27
vos PACKWOOD. OREGON CHARMAN
sos cour KANSAS
DAME PATINCK MOTHEMAN NW YORK
INCLUDE V. ROTM A. BELAWARE
MAX BAUCUS. MOR TAMA
JOHN a. ONCE BLANK
all amount. NEW JERSEY
COURLETE OWN
DAVID PRYOR ARKAN &
- 4. Para VTAM
- a ROCKEFELLER v. was VORGINIA
ALAM a INVOICE WYOWING
BREAUK LOUISIANA
LAMY RETER SOUTH DARITA
RENT COMPAN NORTH DAKOTA
ALPORISE M. O'AMATO NEW YORK
see CANNAM FLORIDA
United States Senate
"SAME M MURKOWBEL ALABAA
CAROL MOBELEY BRAUN ILLINOIS
JON MICKLES OKLAHOMA
COMMITTEE ON FINANCE
LEOVL FAULL - necess - AND CHIP counse.
WASHINGTON, DC 20510-6200
LAWRENCE a... IMMORITY STAMP DIRECTOR
September 29, 1995
The Honorable William V. Roth, Jr.
Chairman
Senate Finance Committee
Washington, D.C. 20510
Dear Mr. Chairman,
I am writing to you to request inclusion of language in your
pending Chairman's Mark relating to the tax provisions for the 1995
budget reconciliation bill.
The language which is set out at TAB A, would provide relief
for the Transportation Communications International Union ("TCU")
by relieving it of the obligation to provide future COLA increases
to its staff retirement beneficiaries.
Joint Tax in a letter dated June 14, 1995, estimated that the
proposal "would have a negligible effect on Federal fiscal year
budget receipts." The Joint Tax letter is at TAB B. In other
words, Mr. Chairman, providing relief to TCU on this matter would
have no cost impact on the fisc.
TCU is entitled to relief because the adoption of the COLA was
based on demonstrably and clearly erroneous actuarial advice.
TCU's Union Staff Retirement Plan (the "Plan") was established
in 1955. Until 1990, the Plan did not provide A COLA
In October of 1990, the Plan Trustees approved an automatic
COLA based on the advice of its actuary that such a benefit could
be granted without any increase in contributions by Plan
participants.
In the summer of 1992, William M. Mercer, Inc. ("Mercer") was
retained by the Plan Trustees to act as the actuary to TCU's Plan.
In making the 1993 actuarial valuations, Mercer advised the
Trustees that the COLA could not be funded without significantly
increasing contributions.
Following receipt of Mercer's actuarial valuations, TCU
amended the Plan to eliminate COLA's on benefits accruing for
active employees after May 14, 1993. Mercer has concluded that
even after the May 14, 1993 Plan amendments, the COLA benefit which
continued to accrue to retiree's under the Plan would require TCU
to raise its pension contributions by $2 million a year -- almost
SEP 30 '95 03:20PM SEN EAUCUS-WASH DC
P.3/7
doubling the level of contribution prior to the adoption of the
COLA.
TCU has concluded that such an increase in pension
contributions is not sustainable and that the Pension Benefit
Guaranty Corporation ("PBGC") may ultimately be required to assume
certain of the obligations of the Plan. A forecast prepared by
Deloitte & Touche LLP projecting the impact of the Plan's COLA on
TCU's future finances over five years shows that at the and of five
years, TCU will have spent all of its operating capital and have
incurred a debt of $1.4 million. A copy of the Deloitte Touche
forecast as well as the most recent valuation report prepared by
Mercer were provided to Finance Committee staff in June of this
year.
If the plan is to remain solvent, TCU requires legislative
relief which would permit TCU to eliminate future COLA benefits
accruing to beneficiaries cf the plan who had retired prior to May
14, 1993. The attached legislative language at TAB A would amand
Section 411 (d) (6) of the IRC and Section 204 (g) of ERISA to
accomplish that result.
TCU, in a letter dated July 26, 1995, addressed to Sarah Fox,
Chief Labor Counsel of the Senate Committee on Labor and Human
Resources, advised Ms. Fox that:
[TCU] has kept all Plan participants advised of the impact of
COLAs. We have received virtually no negative response from
retirees to our stated intent to discontinue future COLA
increases.
A copy of that letter, together with the notices that the Plan
provided to its retirees have been provided to the Finance
Committee Staff.
The Trustee's for the Plan have filed a lawsuit against the
prior actuary who certified that the COLA would not result in any
increase in contributions by the Plan's participants and against
the prior trustees who approved the COLA. Copies of the pleadings
and responses can be provided to you or the Finance Committee staff
upon request. TCU in its letter to Ms. Fox states that "even if
successful, it is not anticipated that any judgment will be
sufficient to cover the cost of the COLA."
My staff has been negotiating with Ms. Fox to determine
whether the Senate Committee on Labor and Human Resources will
exercise jurisdiction over the ERISA provisions contained in the
attached legislative language. I will advise you of the result of
those negotiations.
: am advised that the following persons at the Department of
Labor have reviewed the proposed legislative language at TAB A and
have no objection to its inclusion:
SEP 30 '95 03:2:PM SEN BAUCUS-WASH DC
P.4/7
Olena Berg, Assistant Secretary for Pension and Welfare
Benefits (219-8233),
Meredith Miller, Deputy Assistant Secretary for Policy
(219-8233), and
Alan D. Lebowitz, Deputy Assistant Secretary for Program
Cperations (219-9048).
The Department of Labcr has forwarded the proposed language to the
Department of Treasury for their review and comment. I will advise
you of Treasury's response upon receipt of the same.
In summary, Mr. Chairman, I am firmly convinced that TCU is
entitled to the relief contained in the attached legislative
language. Joint Tax has concluded that enactment of the language
would have "negligible" revenue impact. Unless relief is obtained,
the PBGC may well be required to assume many of the payment
obligations under the plan .. to the detriment of the American
taxpayers.
= request, Mr. Chairman, that you give consideration to
including the legislative language set out at TAB A in your Mark
bill. relating to the tax provision for the 1995 budget reconciliation
Sincerely,
Mar Bauces
Max Baucus
SEP 30 '95 23:21PM SEN BAUCUS-WASH DC
P.5/?
S.L.C.
104TH CONGRESS
IST SESSION
S.
IN THE SENATE OF THE UNITED STATES
Mr. BAUCUS introduced the following bill; which was read twice and referred
to the Committee on
A BILL
To waive certain requirements of the Internal Revenue Code
of 1986 and the Employee Retirement Income Security
Act of 1974 with respect to a plan amendment eliminat-
ing cost-of-living benefits.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 SECTION 1. APPROVAL OF PLAN AMENDMENT ELIMINAT-
4
ING COST-OF-LIVING BENEFITS.
5
(a) Iv GENERAL--The provisions of section
6 411(d)(6) of the Internal Revenue Code of 1986 and sec-
7 tion 204(g) of the Employee Retirement Income Security
8 Act of 1974 shall not apply to 8 qualified plan amendment
9 which provides for the elimination of cost-of-living adjust-
SEP 30 '95 03:21PM SEN EAUCUS-WASH DC
P.67
C:\MAT\MAT95.185
S.L.C.
2
1 ments to benefits under the plan which were provided pur-
2 suant to a plan amendment-
3
(1) which was approved on October 13, 1990,
4
and effective on January 1, 1991, and
5
(2) with respect to which the plan actuary gave
6
advice that the amendment would not result in an
7
increase in any required contribution to the plan.
8
(b) QUALIFIED PLAN AMENDMENT.-For purposes
9 of this section, the term "qualified plan amendment"
10 means a plan amendment which—
11
(1) is adopted before January 1, 1996, and is
12
effective on or after such date,
13
(2) is to & defined benefit plan established on
14
June 30, 1955, and
15
(3) does not reduce the amount of any benefit
16
being paid to any plan participant or beneficiary im-
17
mediately before the plan amendment is effective.
SEP 30 '95 03:21PM SEN BAUCUS-WRSH DC
P.7/7
CONGRESE. - RESERVED
- J. was
- OF STARF
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ESMATE
one MEXIM The
100 Macrwood
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DIAGNAM
a CHARMAN
04/UTY CHEEF OF STAPF
over N. CRANS.
LAWS
WILLIAM V. BOTH 4. BELAVIARE
ARLIAM M. THOMAS CALEDRANA
CRAIN 6. MATCH UTAR
SAM - CHECKE FLORIDA
CAMEL PRICE MOTHMAN 4/W TORE
Congress of the United States
BEAMARE a SCHOOL
SEPUTY Chedd of STATE
CHARLES #. names rejew YEAR
- FAVOUR MONTANA
JOINT COMMITTEE ON TAXATION
a MAYRE
'015 LONGWORTH HOUSE OFFICE BUILDING
WASHINGTON, DC 20615-6453
(202) 225-3621
JUN : t
Honorable Max Baucus
United States Senate
Washington, DC 20510
Dear Senator Baucus:
This is in response to your request dated April 19, 1995,
for a revenue estimate of a proposal which would provide relief
for a specific plan from the provisions of Section 411 (d) (6) of
the Internal Revenue Code of 1986 ("the Code").
Specifically, the bill would provide that a qualified
pension plan would not violate the rules relating to reductions
in accrued benefits (Code sec. 411 (d) (6) ) if the plan was amended
to eliminate cost-of-living adjustments to benefits under the
plan. The bill would apply only to defined benefit plans
established on June 30, 1955, that approved cest-of-living
adjustments on October 13, 1990, which were effective on
January 1, 1991. It is our understanding, from materials
provided by Roger Blauwet of your staff, that the intent of the
proposal is to provide relief to one particular plan, the
Transportation Communications International Union plan. The
revenue estimate is based on this understanding.
The proposal would be effective for plan amendments adopted
before January 1, 1996. We estimate that the proposal would have
a negligible effect on Federal fiscal year budget receipts.
I hope this information 19 helpful to you. If we can be of
further assistance in this matter, please let me know.
Kennech Sincerely O. Kies
THE WHITE HOUSE
WASHINGTON
29 January 1996
TO:
Ben Nye
FROM:
Jennifer O' Connor
RE:
AFL-CIO, COLA response language
Enclosed is correspondence I received from Robert Scardelletti,
President of the Transportation Communications International
Union, requesting the Administration move to correct erroneous
actuarial information used in current COLA calculations.
Please have the appropriate member of your staff draft a response
for Harold and send it back to me. I can be reached at (202) 456-
6350 to discuss. Thank you.
TRANSPORTATION
COMMUNICATIONS
ROBERT A. SCARDELLETTI
International President
TCU
INTERNATIONAL UNION
MITCHELL M. KRAUS
General Counsel
AFFIRIES
LARRY R. PRUDEN
AFL-CIO, CLC
LEGAL DEPARTMENT
Assistant General Counsel
June 7, 1996
file
William K. Bortz, Esquire
Attorney Advisor
Office of Benefits Tax Counsel
water stiff
Department of the Treasury
1500 Pennsylvania Avenue, NW
Room 4017
Washington, DC 20220
Re: Transportation Communications International Union Staff
Retirement Plan
Dear Mr. Bortz:
This letter is being submitted to supplement my letter of
April 18, 1996, in support of a legislative proposal dealing with
the TCU Staff Retirement Plan. That proposal would permit TCU to
void certain amendments to its Plan which called for automatic
COLA's, adopted on the basis of clearly erroneous actuarial advice.
As we previously noted, this proposal has been determined to be
revenue neutral by the Joint Committee on Taxation (see attached),
and we would hope that it would not be opposed by the Treasury
Department.
I have attached excerpts from the recently-taken deposition of
the Plan's former actuary, Robert Nemann. Mr. Nemann had advised
the Union's International Secretary-Treasurer Donald Bobo in July,
1989, that the cost of adopting an automatic COLA was
"prohibitive."
Notwithstanding, Mr. Nemann testified that he learned for the
first time at a breakfast meeting with Mr. Bobo on October 12,
1990, that the Trustees were going to consider a proposal to adopt
an automatic COLA that morning. Mr. Nemann made a rough estimate
of the cost of this benefit on a napkin. He spent approximately
five minutes making this estimate. He concluded that the union
could provide this benefit, without increasing the contribution
level.
Later that morning, Mr. Nemann advised the Trustees that an
automatic COLA would be provided without any contribution increase,
and the Trustees adopted the automatic COLA based on this advice.
By letter to me dated October 23, 1991, Mr. Nemann confirmed
that he "informed the Trustees that the proposed COLA could be
3 Research Place
Rockville, MD 20850
(301) 948-4910
FAX (301) 330-7662
2
adopted without requiring an increase in the 17-1/2% contribution
rate.
II
In fact, Mr. Nemann's advice has clearly proven erroneous.
The cost of this benefit is "prohibitive," as Mr. Nemann had
originally advised Mr. Bobo in July, 1989. The legislative relief
being sought is needed to prevent the Plan from failing to meet
minimum funding requirements and the possible bankruptcy of this
Union.
This proposal is supported by Senators D'Amato, Moynihan and
Baucus, as well as the Pension Benefit Guarantee Corporation. In
the event you should need further information, please feel free to
contact me.
Very truly yours,
Matchell Krus
Mitchell M. Kraus
General Counsel
MMK: fm
Attachments
CC: Jennifer O'Connor
Nell Hennessy
Robert A. Scardelletti, IP
CARD or
HOUSE
SENATE
MARY as SCHWITT
an MORE TEXAS.
BOB PACEWOOD OMBON
(PUPY EMIL OF STATE
CHAIRMAN
view CHARMAN
-
PRIMP M. CRANS
WILLIAM BOTH JR. DELAWARE
WILLIAM M. TWOMAS ORNIA
DRAWN c MATCH UTAH
SAM M. BIBBONS FLORIDA
Congress of the United atates
(if KHAPE A SCHMITT
CAREL PATRICE MOVNIMAN NEW YORK
DEPUTY [nd] a START
CHARLES 8. MANGEL new YORK
MAX BAWCUS. MONTANA
(REVENUE ANALYSIS
JOINT COMMITTEE ON TAXATION
1015 LONGWORTH HOUSE OFFICE BUILDING
WASHINGTON. DC 20615-6453
(202) 225-3421
UN 1 1 '995
Honorable Max Baucus
United States Senate
Washington, DC 20510
Dear Senator Baucus:
This is in response to your request dated April 19, 1995,
for a revenue estimate of a proposal which would provide relief
for a specific plan from the provisions of Section 411 (d) (6) of
the Internal Revenue Code of 1986 ("the Code").
Specifically, the bill would provide that a qualified
pension plan would not violate the rules relating to reductions
in accrued benefits (Code sec. 411 (d) (6) ) if the plan was amended
to eliminate cost-of-living adjustments to benefits under the
plan. The bill would apply only to defined benefit plans
established on June 30, 1955, that approved cost-of-living
adjustments on October 13, 1990, which were effective on
January 1, 1991. It is our understanding, from materials
provided by Roger Blauwet of your staff, that the intent of the
proposal is to provide relief to one particular plan, the
Transportation Communications International Union plan. The
revenue estimate is based on this understanding.
The proposal would be effective for plan amendments adopted
before January 1, 1996. We estimate that the proposal would have
a negligible effect on Federal fiscal year budget receipts.
I hope this information is helpful to you. If we can be of
further assistance in this matter, please let me know.
1
Sincerely,
Kenneth /s/ J. Kies
May 7, 1996
Donald A. Bobo, et al
Page 137
Page 140
(1)
A: I'm not sure. Probably. but I'm not sure.
(1)
A: Of this so-called proposed COLA.
[2] Q: Did you have any discussions with anyone
(2)
Q: So you discussed that with Mr. Bobo at the
[3] other than Mr. Bobo before the meeting?
(3)
breakfast meeting?
(4) A: Other than casual conversation, I don't
(4)
A: Yes.
[5] recall any.
(5)
Q: What did you tell him at the breakfast
(6) Q: Did you have any discussion about the COLA
(6) meeting about cost?
M with anyone in between the time you left your
M A: Basically I told him that I couldn't put
(8) breakfast meeting and the time you actually began
(8) an exact cost on such a COLA. and that in a few
(9) the formal trustees meeting?
(9) minutes time sitting there at the breakfast meeting
(10) A: I don't believe so. I don't recall any.
[10] 1 had come up with some rough estimates. and that
:11) Q: I'm going to hand you what was marked
(11) it appears that they could adopt such a COLA. And
(12) earlier as Exhibit 34. These are the minutes of
[12] if they did, the basic current contribution of
(13) the October 12, 1990. meeting. The minutes
(13) 17-and-a-half percent would not have to be
[14] indicate that Mr. Kilroy and Mr. Bobo and Mr. Lynch
(14) increased. And I reviewed at that time the
(15) and Mr. Bosher were present, and Mr. Mazur was not
(15) Schedule B accountant balance. which means they had
(16) present due to illness, and you were present: is
[16] a margin in the minimum contributions.
(17) that accurate?
(17)
I also discussed, I recall, specifically
(18) A: I know I was there. I don't specifically
[19] recall the other attendees.
[18] the amortization periods that we had been looking
(19) at in some of the earlier items that we costed
[20] Q: Do you recall there being anyone else at
(20) earlier that year.
[21] the meeting other than the people listed here?
(21)
[22] A: No. I don't.
If nothing were adopted, it was projected
[22] that the Plan would be fully funded in
Page 138
(1)
Q: Was Mr. Howard there?
Page 141
[2] A: I do not know.
(1) approximately one year from that time. and that if
[2] this proposed COLA were adopted, that the
(3) Q: Do you know a man by the name of Jerry
(4) Lynch?
[3] amortization period would be backed up. I don't
[5] A: Yes.
[4] think I give him a specific number, but it would be
[6] Q: Was he there?
(5) back up again to substantial time in the future.
[6]
(7) A: I do not know.
I did say that there is no way that I
(8) Q: Do you know Mr. Bobo's then secretary,
[7] could say without doing a full cost study whether
[9] Berdine Pursilley?
(8) or not the contribution would have to be increased
(10) A: Yes, I do.
[9] in the future down the road, that it would not have
[11] Q: Was she there?
(10) to be increased for some time into the future. But
[12] A: I don't know.
(11) whether it would have to be increased eventually, I
(12) didn't know.
(13) Q: Let me ask you to drop down to the third
[13] Q: When you did these rough estimates. I
(14) paragraph, "Chairman Kilroy thoroughly discussed
(15) the many discussions" and so on.
(14) suppose, at the breakfast table with Mr. Bobo, did
[15] you have your files with you?
(16)
Do you recall that happening, a discussion
(17) of previous discussions about COLAs?
[16] A: I probably had the actuarial report. I
[18] A: I recall discussing COLAs. yes, but as to
(17) don't recall when it was dated. That was prepared
[18] as of January 1. 1990, and I believe that's the
(19) any specifics. no.
(19) report referred to in the minutes that was
(20) Q: The next paragraph begins, (reading)
(21) following a discussion by the actuary of his most
[20] discussed briefly at the trustees meeting. So yes,
(21) which gave the basic status of the Plan as of that
(22) recent actuarial study, which indicated that the
[22] time.
Page 139
[1] Plan is financially able at this time to effect
Page 142
(1)
Q: When you were making a rough estimate, did
(2) some sort of automatic COLA, it was proposed and
(2) you make any notes?
[3] so on.
[3]
A: I don't believe so, no. I may have
(4)
What do you remember happening at this
(4) scratched on a napkin some numbers, but I didn't
(5) point in the meeting?
[5] make any notes as such.
[6]
A: Which part?
M Q: Okay. Did you speak to the question of
[6] Q: How long do you think you spent roughing
(8) the COLA at the meeting?
M out the estimate that you made that morning?
(9) A: Yes.
(8) A: Not very long. I couldn't tell you
(9) exactly.
(10) Q: What did you say?
[10] Q: Five minutes?
(11) A: I reiterated parts of a discussion that
(11)
(12) had occurred prior to the meeting with Don Bobo.
A: Yeah. In that kind of ball park.
(12)
[13] Q: Did you indicate to the other members of
Q: So when you got to the meeting, you
(14) the board that you had had a meeting with Mr. Bobo
(13) discussed the cost estimate that you had roughed
(14) out with the trustees; is that right?
(15) that morning?
[15]
A: Briefly, yes.
[16] A: I don't know. I don't know if that was
[16] Q: You tell me as specifically as you can
[17] indicated or not by myself or anyone else.
(17) what you told them.
(18) Q: What parts of the discussion did you
(18) A: I can't really tell you real specifically
[19] reiterate?
(19) because I don't recall the specific conversation at
(20) A: I think the items concerning cost
[20] the trustees meeting. All I can recall is
(21) basically that I had discussed cartier.
(21) discussing it. And I would have reiterated what I
[2] Q: As relating to the cost of what?
[22] said earlier in the day, but I don't recall
Page 137 - Page 142 (26)
Min-U-Scripto
Miller Reporting Company, Inc.
Donald A. BODO, CL all
Page 143
Page 146
[1] specific statements that I made to the trustees. I
[1] increased effective january 1. 1991. for those
(2) think 1 tried to review what was discussed.
(2) participants who retired prior to January 1. 1991,
(3)
Q: Did you tell them that the basic form of
[3] at the rate of ten percent for each three-vear
(4) the proposal had been first developed that morning?
(4) period elapsed. Such increases to be applied on a
(5) A: No. I don't think I told them that.
(5) compounded basis.
[6] Q: Did Mr. Bobo tell them that?
[6]
That. to me. means that it was a
[7] A: I don't know. I don't know that he told
[7] retroactive. in a sense, increase for people who
[8] them that it had been-I don't know that it was
(8) retired. Somebody had been retured ten years. he
(9) developed that morning. I don't know when It was
[9] would get three maximum ten percent increases to
[10] developed, the idea of that particular COLA.
(10) his benefit effective January 1. 1991; is that
[11] Q: But that morning was the first time you
(11) right?
(12) heard about it?
(12) A: Yes. I believe so.
[13] A: That's correct.
[13] Q: When you were trying to rough out the
(14) Q: Did you tell them that the costs that you
[14] estimated cost of this benefit. did you take that
[15] were discussing had been something that you made a
[15] into account?
[16] rough estimate of that morning?
[16] A: Roughly.
(17) A: Again, I couldn't say specifically whether
[17] Q: Did you take into account the idea that it
[18] I said that exactly or not.
(18) was applied on a compounded basis what I will call
(19) Q: But when you made those estimates. you did
(19) the retroactive increase?
(20) those. went through that process at breakfast with
[20] A: Yes. that was part-well. yes and no.
[21] Mr. Bobo, possibly scratching something on the back
[21] Those elements were part of the proposed COLA that
[22] of a napkin?
[22] was discussed in that morning breakfast meeting.
Page 144
Page 147
(1) A: Possibly. I don't recall if I actually
[1] As far as specifically taking into account specific
[2] wrote numbers down or not.
(2) items of the proposal, I can't say that I did or
(3) Q: Did you tell the trustees at the meeting
[3] not under the environment of attempting to come up
(4) what effect this proposal would have on the Plan's
[4] with a real rough estimate.
(5) amortization period?
(5) Q: After you discussed your rough estimate,
(6) A: I believe. again, that was generally
[6] did you receive any questions from any of the
[7] discussed, yes, but as far as specifically what
[7] people present at the meeting?
[8] effect, no. because I didn't know what effect.
[8] A: I couldn't tell you. I don't recall.
(9) Q: You had come up with an estimate for the
[9] Q: Did anyone there ask you to relate what
[10] four- and eight-year ten percent COLA that you
(10) you were telling them that morning to what you had
(11) indicated would increase the Plan's amortization
[11] previously said, particularly in the letter to
(12) period to 5.3 years, I believe; is that right? It
[12] Mr. Bobo where you used the term "prohibitive" when
(13) goes back to that August 6th document.
[13] you talked about an automatic COLA?
(14) A: 1 think that was the period.
[14] A: I don't recall.
(15) Q: Did you anticipate that the impact on the
[15] Q: At the time you were at this meeting, did
[16] amortization period of this proposal, as outlined
(16) you recall that you had previously told them that
(17) in the minutes here, would be substantially more
(17) an automatic full fledged COLA was prohibitive?
(18) than two in terms of its effect on the amortization
[18] A: I couldn't tell you if I recalled that or
(19) period?
[19] not at the time.
[20] A: Yes. I would-I would have anticipated
[20] Q: The minutes also go on to say, (reading)
(21) that.
(21) it was also proposed that the maximum years of
(22) Q: But you didn't know what number that would
[22] credited service under the Plan be increased to 35.
Page 145
Page 148
(1) be?
(1) which is the maximum years of credited service now
[2] A: No.
(2) in effect in Canada.
(3) Q: The proposal that is described here in the
[3]
That was something you had an opportunity
(4) minutes on Exhibit Number 34 really has two parts
(4) to cost out prior to the meeting; is that right?
[5] to It. It's ten percent on the third anniversary
(5) A: Yes. I believe that was part of the cost
(6) date of benefit commencement. I guess that's for
[6] estimates that were given earlier.
(7) each participant; is that right? In other words.
(7) Q: Did you separately describe the cost of
[8] you would look at an individual, look at his
[8] that benefit increase?
[9] retirement date and every third anniversary you
(9) A: I believe I did.
[10] would apply the increase?
[10] Q: What did you tell the board?
[11] A: Yes.
[11] A: I can't tell you exactly, but I think I
(12) Q: So increases would take place throughout
(12) discussed essentially what was described in the
(13) the year on a person-by-person basis throughout the
[13] cost estimate of that, that it had a minor effect,
(14) third year after this was adopted?
[14] relatively speaking, a minor effect on the
(15) A: I believe that's the way-I don't recall
[15] amortization period.
(16) if it was-yes, to the best of my recollection,
[16] Q: Did you discuss the cost of the reduction
(17) that's what was discussed. The only hesitation was
[17] in the early retirement reduction factor that we
(18) I don't recall if there was discussion of a
[18] had taken a look at, prior to the meeting?
[19] specific date each year for such increases or not.
(19) A: 1 don't recall discussing that.
[20] I think it was just continuous.
[20] Q: That was an option that you studied but it
(21) Q: (Reading) It was also proposed that the
[21] wasn't even discussed at the meeting?
2 pension benefit in effect on December 31, 1990, be
[22]
A: Not to my recollection.
Miller Reporting Company, Inc.
Min-U-Scripto
(27) Page 143 Page 148
R.E. NEMANN & ASSOCIATES
CONSULTING ACTUARIES
5715 HARRISON AVENUE, SUITE 3C
CINCINNATI. OHIO 45248
(513) 574-2291
October 23, 1991
Mr. Mitchell M. Kraus
RECEIVED
General Counsel
Transportation Communications Union
3 Research Place
OCT 25 1991
Rockville, Maryland 20850
Re: Staff Retirement COLA
LEGAL DEPT.
Dear Mitch:
The actuarial study referred to in the minutes of the October 12,
1990 Trustees meeting is the regular Actuarial Report as of
December 31, 1989, dated March 30, 1990 (copy enclosed). That report
did not analyze or comment on any potential Plan changes; it did
report the status of the Plan as of December 31, 1989.
There was no written actuarial report on the proposed COLA prior to
its adoption. The proposed COLA was presented to me the dav of the
Trustees meeting, October 12, 1990, and I was asked if the Plan could
support it under the current contribution rate of 17-1/2% of covered
salary. Based upon the then current status of the Plan, as reflected
in the December 31, 1989 Actuarial Report, I informed the Trustees
that the proposed COLA could be adopted without requiring an increase
in the 17-1/2% contribution rate.
The December 31, 1990 Actuarial Report (copy enclosed) does reflect
the impact of the COLA which was effective January 1, 1991. The
financial impact of the COLA can be analyzed by comparing the results
reported in Table 8 of the two actuarial reports. The years required
to fund the unfunded actuarial reserve increased from 1.9 years as of
December 31, 1989 to 24.0 years as of December 31, 1990. Thus, had
the COLA not been adopted, the unfunded reserve would have been
completely funded by December 31, 1991. At that time, the
contributions to the Plan would have been reduced by approximately
50%. With the COLA in place, this reduction in contributions will
not occur for another 23 or 24 years.
R.E. NEMANN & ASSOCIATES
CONSULTING ACTUARIES
Page Two
October 23, 1991
Mr. Mitchell M. Kraus
Re: Staff Retirement COLA
Please give me a call after you have had a chance to review this
information so that we can discuss any questions you might have.
Sincerely,
R. E. NEMANN & ASSOCIATES
B.D.
Robert Nemann, A.S.A.
Consulting Actuary
RN/mn/c