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A second action was filed in October 1978, against seventeen present and former trustees of the Central States, Southeast and Southwest Areas Health and Welfare Fund (Health and Welfare Fund).

The second complaint focuses on the relationship between the Health and Welfare Fund and Amalgamated Insurance Services Agency, Inc. (Amalgamated). Under its contract with the Health and Welfare Fund, Amalgamated should process the medical reimbursement claims submitted by the participants, while taking care that the claims are paid only in accordance with the terms of the various plans.

The substance of the complaint is that (1) the contract was awarded to Amalgamated without prudent consideration of alternatives or reasonable competitive bidding; (2) the ongoing relationship with Amalgamated is imprudent because the Health and Welfare Fund lacks reasonable control over Amalgamated's activities and (3) the Health and Welfare Fund has imprudently raised its payments to Amalgamated, and (4) monetary and injunctive relief is required.

Labor's motion for preliminary relief was denied in November, 1978, and the Health and Welfare Fund's motion for summary judgment was partially granted in June of 1979. The Seventh Circuit reversed the latter order on June 24, 1980. As a result of the Court of Appeals decision, the case was assigned to a new judge late last year, and discovery began in earnest.

Thus far, Labor has taken significant documentary discovery from the Health and Welfare Fund and from Amalgamated's auditors. An earlier action to enforce an administrative subpoena for Amalgamated's documents is being pursued, although a final decision has been delayed for more than a year. A decision is expected

soon.

However, as with the other action mentioned above, discovery is proceeding on an orderly basis. Hundreds of thousands of documents have been collected and are being analyzed to form the foundation for the depositions which will follow.

TEAMSTERS PENSION FUND

Under its agreement with the Federal Government, the Teamsters' Central States Pension Fund has appointed two independent firms to manage its assets. These contracts will expire next October.

Question: What is the Department doing to assure that the Teamsters' Central States Pension Fund continues to have independent managers to handle its assets?

Answer: The Department has sought, through negotiations and litigation, an enforceable decree which would require that the Teamsters' Central States Pension Fund maintain independent asset management in the future. These negotiations are currently being closely monitored by Judge Moran in Donovan v. Fitzsimmons. Whatever the outcome of these negotiations, the Department intends to pursue every available avenue to ensure that independent asset management continues beyond the expiration of the agreement between the Fund and the Equitable Life Assurance Society of America. It should be noted that the qualification letter issued by the Internal Revenue Service, certifying the tax-exempt status of the Fund,

conditions that status on the maintenance of independent asset management. This measure, combined with those sought by the Department, should provide adequate assurance to the participants and beneficiaries that the assets of the plan are being handled by qualified professionals.

Question: What is the Department doing to prevent the former trustees from regaining control?

Answer: The control of plan assets is a major issue in the Department's efforts to protect the benefits of participants and beneficiaries. That is why the Department is making every effort to ensure that independent asset managers continue to manage the Fund assets. As long as independent managers handle the assets, the Department believes that the benefits of participants and will be adequately

beneficiaries

protected.

ADVISORY ACTIVITIES

In 1983, the Pension and Welfare Benefit Programs is reducing national office activity not directly related to enforcement, such as issuing advisory opinions, answering requests for information, and disclosing plan documents. However, all of these activities seem to be increasing at the Office of Labor-Management Standards Enforcement which enforces the Landrum-Griffin Law.

Question: Why are these two offices apparently going in the opposite direction?

Answer: During the 1983 budget planning cycle some very difficult program priority decisions had to be made due to resource constraints. Generally, direct enforcement activities were given greater emphasis, particularly field enforcement activities. The effect of this strategy in the Pension and Welfare Benefit Programs was a reduction of activity in selected areas such as advisory opinions, information requests, and document disclosure.

In the Labor-Management Enforcement Program (LMSE), the FY 1982 workload estimates were finalized at a time when projections indicated the need to divert national office resources to meet the program's mandated obligation to supervise the national election reruns of the International Association of Fire Fighters and the American Federation of Government Employees. Since that time the Department has provided 55 employees to assist in this matter. As a result, national office staff will not be diverted to the extent anticipated and 1982 workload estimates involving technical assistance, inquiries, document disclosure, etc. will, in reality, be higher than those reflected in the 1983 budget submission and more comparable to FY 1981 and FY 1983 workload figures.

In summary, we do not believe those two programs are going in opposite directions, but we do deal with awkward workload projections in the LMSE area because of the impossibility to project the occurrence of election reruns.

Question: How will you discourage people from requesting copies of pension plans on file at the Department?

Answer: We have no plans to discourage anyone from requesting copies of reports. However, because of a reduction in disclosure room staff, requestors may have to wait longer for a response. In addition, fewer summary plan descriptions (SPDs) will be disclosed because we will have to spend more time locating each one. This extra time is a result of our stopping the microfiching of SPDs to save contract funds. We are not satisfied with this arrangement and are looking at changes that can be made to make our operations more cost effective.

Question: What effect will a reduction in advisory services have on future violations?

Answer: Reducing the number of advisory opinions issued by PWBP could have some adverse effect on the actions of plan administrators and others involved with employee benefit plans. PWBP issues advisory opinions (written statements applying ERISA to specific factual situations) on a wide range of difficult issues, for example, determining whether a certain individual is a plan administrator under ERISA, whether a certain plan is covered by ERISA, whether ERISA preempts a certain law, etc. These opinions not only assist the particular individuals requesting an opinion but assist all such individuals in similar circumstances.

We are hopeful that ERISA expertise has increased to an extent, and enough regulations have been issued, that the ERISA community can interpret the law without benefit of advisory opinions. We also intend to use speeches and responses to telephone inquiries to provide assistance and make our position clear.

PENSION BENEFIT GUARANTY CORPORATION

STATEMENT OF ROBERT E. NAGLE, EXECUTIVE DIRECTOR

ACCOMPANIED BY:

HENRY ROSE, GENERAL COUNSEL, OFFICE OF THE GENERAL COUNSEL

WILLIAM DEHARDE, DIRECTOR, OFFICE OF PROGRAM OPERATIONS LAWRENCE MASLAN, DIRECTOR, OFFICE OF FINANCIAL OPERATIONS

SUBCOMMITTEE PROCEDURE

Senator ABDNOR. Next, we are going to hear from Mr. Robert Nagle, the Executive Director of the Pension Benefit Guaranty Corporation. Mr. Nagle, we welcome you and your colleagues this morning. I will ask you to introduce the people with you.

INTRODUCTION OF ASSOCIATES

Mr. NAGLE. Good morning, Mr. Chairman.

On my left, immediate left, is Mr. Henry Rose who is the General Counsel of our agency.

And to his left is Mr. William DeHarde who is Director of our Office of Program Operations.

On my right is Mr. Lawrence Maslan who is our Director of Financial Operations.

Senator ABDNOR. Fine.

Mr. Nagle, I know you have a prepared, written, statement. As the same with Mr. Dotson, it isn't necessary for you to go through it in its entirety. I assure you your written statement will be placed in the record as though given in the full form. So you may go ahead any way you care to.

Mr. NAGLE. Well, if it suits you, Senator, we can just proceed with the questions, or I will give a short summary.

SUMMARY OF PREPARED STATEMENT

Senator ABDNOR. Would you like to give us a short summary?
Mr. NAGLE. All right.

The Pension Benefit Guaranty Corporation was established in 1974 under Title IV of the Employee Retirement Income Security Act. Our function is to guarantee certain benefits under privately sponsored defined benefit pension plans.

The costs of our program are borne entirely by premiums assessed against plans which are covered by the program. And we use no general revenue funds.

At the present time, we administer essentially two programs. One is for single-employer defined benefit plans. Under that program, if the sponsor of a single-employer program intends to terminate the plan,

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