SENIOR SENATE FEDERAL PROPOSAL NO. 10

INTRODUCED BY SENIOR SENATOR ERMAN

(COAUTHOR: SENIOR SENATOR LEVY)

(COAUTHORS: SENIOR ASSEMBLY MEMBERS MEADE AND TROTTER)

LEGISLATIVE COUNSEL’S DIGEST

SFP 10: RETIREE PENSION AND HEALTH BENEFITS.

UNDER EXISTING FEDERAL LAW, THE PENSION BENEFIT GUARANTY CORPORATION IS ESTABLISHED WITHIN THE DEPARTMENT OF LABOR AS AN INSURANCE PROGRAM TO PROVIDE FOR PAYMENT OF PRIVATE PENSION PLAN BENEFITS IF A PARTICIPATING CORPORATION CANNOT MEET ITS PENSION OBLIGATIONS, SUBJECT TO SPECIFIED CONDITIONS AND LIMITATIONS.

THIS MEASURE WOULD MEMORIALIZE THE CONGRESS AND THE PRESIDENT TO ENACT LEGISLATION THAT WOULD LIMIT CORPORATE ABANDONMENT OF RETIREE PENSIONS AND HEALTH BENEFITS AND TO PROVIDE ADEQUATE FUNDING OF THE PENSION BENEFIT GUARANTY CORPORATION TO MEET ITS OBLIGATIONS TO RETIRED AND SOON-TO-BE-RETIRED WORKERS.

VOTE: MAJORITY.

SFP 10: RELATING TO PROTECTION OF RETIREE PENSION AND HEALTH BENEFITS

WHEREAS, DEFINED BENEFIT RETIREMENT PROGRAMS AND RETIREMENT HEALTH CARE PROGRAMS HAVE BEEN ESSENTIAL PARTS OF OVERALL EMPLOYEE COMPENSATION FOR GENERATIONS; AND

WHEREAS, RETIREMENT PENSIONS AND HEALTH CARE BENEFITS HAVE BEEN ESTABLISHED THROUGH FAIR COLLECTIVE BARGAINING IN MANY INDUSTRIES, THE SERVICE SECTOR, AND GOVERNMENT; AND

WHEREAS, TWO-THIRDS OF THE FORTUNE 1000 LARGEST FIRMS IN THE UNITED STATES HAVE TRADITIONAL RETIREMENT BENEFITS, BUT OF THESE, 70 PERCENT, OR 435 FIRMS, HAVE ASSETS COVERING LESS THAN 90 PERCENT OF THE PROMISED BENEFITS, AND ONE-HALF COULD ONLY COVER LESS THAN 80 PERCENT OF COMMITMENTS; AND

WHEREAS, THE PENSION BENEFIT GUARANTY CORPORATION, THE FEDERAL GOVERNMENT AGENCY CREATED TO PAY BENEFITS WHEN PRIVATE CORPORATIONS ARE NOT ABLE TO FULFILL THEIR OBLIGATIONS, IS UNDER-FUNDED TO MEET THE GROWING OBLIGATIONS; AND

WHEREAS, CURRENT FEDERAL GOVERNMENT RULES GOVERNING PENSION FUND CONTRIBUTIONS GIVE CORPORATIONS SO MUCH FLEXIBILITY THAT ONLY 20 PERCENT OF COMPANIES CURRENTLY PAY THE MAXIMUM CONTRIBUTIONS; AND

WHEREAS, BECAUSE OF THE CONVERSION OF DEFINED BENEFIT PLANS TO 401(K) DEFINED CONTRIBUTION PLANS, THE PENSION BENEFIT GUARANTY CORPORATION IN 2005 GUARANTEED ONLY 31,000 PENSION PLANS, DOWN FROM 112,000 PLANS JUST 20 YEARS AGO; AND

WHEREAS, MANY COMPANIES ARE NOT MAKING ADEQUATE CONTRIBUTIONS INTO PENSION AND RETIREE HEALTH BENEFIT PLANS, AND CORPORATIONS INCREASINGLY ARE DROPPING PLANS, FREEZING EXISTING BENEFITS, OR SEEKING COURT PERMISSION UNDER CHAPTER 11 BANKRUPTCY PROCEEDINGS TO ABANDON EXISTING PENSIONS AND HEALTH BENEFITS; AND

WHEREAS, THESE ACTIONS IMPERIL THE HEALTH, WELL-BEING, AND SECURITY OF HUNDREDS OF THOUSANDS OF AMERICAN WORKERS AND THEIR FAMILIES; AND

WHEREAS, WHILE MILLIONS OF BABY BOOMER EMPLOYEES IN THEIR LATE FORTIES AND FIFTIES ARE SEEING THEIR PLANNED RETIREE PENSIONS AND HEALTH PLANS SCALED BACK OR ABANDONED ALTOGETHER, THESE BABY BOOMERS ARE THE LEAST ABLE TO REBOUND FINANCIALLY BECAUSE THEY HAVE FEWER WORKING YEARS REMAINING AND ARE LESS LIKELY TO CHANGE CAREERS OR JOBS; AND

WHEREAS, WHEN COMPANIES SWITCH FROM DEFINED BENEFIT TO 401(K) RETIREMENT PROGRAMS, BABY BOOMERS ARE ESPECIALLY HURT BECAUSE FIXED BENEFIT PLANS ARE TYPICALLY BASED ON MAXIMUM SALARY LEVELS AT THE END OF EMPLOYMENT; AND

WHEREAS, AN AUGUST 2005 SURVEY SHOWED THAT NEARLY ONE-HALF OF UNITED STATES COMPANIES EXPECTED TO REVISE THEIR PENSION PLANS IN THE NEXT YEAR, WITH MOST PLANNING TO FREEZE BENEFITS; NOW, THEREFORE, BE IT

RESOLVED, BY THE SENIOR SENATE AND THE SENIOR ASSEMBLY, JOINTLY, THAT THE SENIOR LEGISLATURE OF THE STATE OF CALIFORNIA AT ITS 2006 REGULAR SESSION, A MAJORITY OF THE MEMBERS VOTING THEREFOR, HEREBY PROPOSES THAT THE CONGRESS AND THE PRESIDENT ENACT APPROPRIATE LEGISLATION TO LIMIT CORPORATE ABANDONMENT OF RETIREE PENSIONS AND HEALTH BENEFITS; AND BE IT FURTHER

RESOLVED, THAT THE UNITED STATES CONGRESS AND PRESIDENT PROVIDE ADEQUATE FUNDING OF THE PENSION BENEFIT GUARANTY CORPORATION TO MEET ITS OBLIGATIONS TO RETIRED AND SOON-TO-BE RETIRED WORKERS; AND BE IT FURTHER

RESOLVED, THAT THE SENIOR LEGISLATURE OF THE STATE OF CALIFORNIA RESPECTFULLY MEMORIALIZES THE CONGRESS AND THE PRESIDENT TO ENACT APPROPRIATE LEGISLATION THAT WOULD ADDRESS THE CONCERNS SET FORTH IN THIS MEASURE; AND BE IT FURTHER

RESOLVED, THAT A COPY OF THIS MEASURE BE TRANSMITTED TO THE PRESIDENT AND VICE PRESIDENT, THE SPEAKER OF THE HOUSE OF REPRESENTATIVES, THE CHAIRPERSONS OF THE HOUSE AND SENATE COMMITTEES ON AGING, AND TO EACH SENATOR AND REPRESENTATIVE FROM CALIFORNIA IN THE CONGRESS OF THE UNITED STATES.

RN20061905907

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