Opening Statement of the Hon. Amo Houghton, Chairman, and
a Representative in Congress from the State of New York

Hearing on Retirement Security and Defined Benefit Pension Plans

June 20, 2002

Good morning.  In March, the Oversight Subcommittee held a hearing on defined contribution pension plans.  At this hearing, we heard from small and large businesses and their employees, the AFL-CIO, and pension experts.  They discussed the opportunities, problem areas, and suggestions for improvement of defined contribution plans.

Nine days after this hearing, this Committee took action and passed some of the recommendations discussed at the hearing as part of the “Employee Retirement Savings Bill of Rights.”  These provisions went on to be passed by the House in April.  It was a great culmination of effort led by my good friends Mr. Portman and Mr. Johnson – who both serve on this Subcommittee – and Mr. Cardin.  We thank all of them for their leadership and now await Senate action.

Today, we want to continue this retirement security discussion by reviewing another type of retirement savings vehicle – defined benefit pension plans.  While defined contribution plans have increased in recent years, the number of defined benefit plans continues to fall.  What is causing this decline?  We will hear from the insurer of these plans, the Pension Benefit Guarantee Corporation, about this trend.  We also will hear from pension experts on the positive and negative aspects of defined benefit pension plans, as well as their risks, and suggestions for improvement.

But first, we will hear from Congressman Gil Gutknecht of Minnesota.  Mr. Gutknecht will talk to us – from personal knowledge of an experience in his district – about some of the ramifications on workers when an employer converts a traditional defined benefit pension plan into a hybrid defined benefit plan called a cash-balance plan. 

A retirement plan is an essential employee benefit.  Yet, companies are not required to offer retirement plans and can modify, convert, or eliminate their retirement plans.  What is the right balance and what can be done to encourage pension plan participation and better the future of our retirement security?  As with our pension hearing in March, I hope that this discussion will yield some fruitful results.