Statement by Marilyn O'Connell,
Associate Commissioner for Program Benefits,
Social Security Administration
before the Senate Committee on Government Affairs,
Subcommittee on Oversight of Government Management, Restructuring, and District of Columbia
October 6, 1998
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the role of the Social Security Administrati on (SSA) under the Coal Industry Retiree Health Benefit Act of 1992 (Coal Act). Let me begin by briefly reviewing the requirements of the law and the responsibilities which were assigned to SSA. Then, I will discuss SSA's progress in carrying out these responsibilities.
Requirements of the Law
The Coal Act merged the 1950 and 1974 benefit plans of the United Mine Workers of America (UMWA) into a new "Combined Fund," administered by a board of trustees as a private tax-exempt employee benefit plan. This new Fund is designed to provide lifetime health benefits (and death benefits) for beneficiaries of the old plans--retired miners (a ll of whom retired before 1976) and their dependents or survivors. Benefits are financed from funds transferred from UMWA pension plans, premiums paid by coal operators, and transfers from the Department of Interior's "Abandoned Mine Land Reclamation Fund."
Under the law, coal operators pay premiums for all beneficiaries who are determined to be their responsibility. The premiums arc established by formulas in the law. The law provides for them to pay a pro rata share of the premium cost for beneficiaries for whom no assignment of responsibility can be made (unassigned beneficiaries). However, the assigned operators have not had to pay premiums for the unassigned miners as the Coal Act provides that the assigned operators are only assessed premium costs for the unassigned miners if the funds transferred from the Department of Interior's "Abandoned Mine Land Reclamation Fund" are insufficient. Thus far, these funds have been sufficient.
SSA was assigned three responsibilities under the Coal Act:
- To calculate the amount of the health benefit premium for each
- To assign each miner to a coal operator who will be responsible for the
health (and death ) benefit premiums for that miner and any beneficiaries
eligible because of their relationship to the miner, and notify the operator
of that assignment; and
- To decide requests by the coal operators for review of assignments .
Let me now briefly discuss each of these responsibilities.
Calculating the Premium
The law states that the health benefit premium amount is to be based on the average dollar amount of health benefits paid per person under the old plans for the plan year beginning July 1, 1991, updated to take account of the increase in the medical component of the Consumer Price Index (CPI). The law requires us to calculate the premium for each plan year beginning on or after February I, 1993. The first plan year began on February I, 1993, because that is the date the old plans were merged to create the Combined Fund. By law, subsequent plan years began on October I, 1993, and each succeeding... October 1.
The Coal Act requires that the premium calculation be based on the following information: (1) the aggregate amount of payments from both the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan for health benefits (less reimbursements but including administrative costs) for the plan year beginning July 1, 1991, for all individua ls covered under the plans for that plan year, and (2) the number of such individuals covered under the plans for that plan year. The aggregate cost divided by the number of individuals, increased by the approximate percentage increase in the medical component of the CPI from 1992 to the year in which the plan year begins, produces the premium per individual.
SSA has calculated the premiums and timely notified the Trustees of the Combined Fund of the premiums for each year since the law was enacted. The premium amount beginning October 1, 1998 is $2,420.19.
Our second task involved assigning responsibility for each miner to the appropriate coal operators. We were given this respons ibility because SSA has the miner's wage records. These wage records are a key component in determining which coal operator is liable for the miner assignment.
This process began with the Combined Fund identifying approximately 80,000 miners--both living and deceased--who were covered by the Act. The Bituminous Coal Operators Association (BCOA) provided us a list of approximately 15,000 of these miners for whom certain large coal operators voluntarily acknowledged premium responsibility.
The remaining 65,000 miners had to be assigned to a coal operator following the criteria set forth in the law. In general, the re are three factors that are considered in determining to which coal operator a miner is assigncd--length of a miner's employment with a coal operator who was a signatory to a UMVA wage agreement (also called a signatory operator), recency of that employment, and the date the wage agreement was signed by the operator and the UMWA.
More specifically, the law states that a miner must be assigned to a coal operator according to the following order of priority:
- First, to the last active signatory operator (as defined previously) for whom the miner worked at least 2 years under a UMVA agreement (or if an inactive signatory, to its related company, if any) provided that the operator is also a 1978 UMWA wage agreement signatory.
- If none, then to the last active signatory opera tor for whom the miner worked under a UMVA agreement (or if an inactive signatory, to an active related company, if any) provided the operator is also a 1978 signatory.
- If none, then to the active signatory operator of any agreement for whom the miner worked the longest under a UMWA agreement (or if an inactive signatory, to an active related company) in the period prior to 1978.
- If no assignment can be made under the above criteria, the miner is treated as "unassigned." This means that, because responsibility for the premium cannot be assigned to a particular signatory operator, the miner is placed in an unassigned pool.
Before we could even begin the assignment process, we had to develop lists of assignable coal operators. These lists were developed by SSA using information which was provided to us by the BCOA and the UMWA, as well as SSA's own records. This list was modified as we began the assignment process due to information provided by operators appealing their assignments, and other available sources of information, such as the Keystone Coal Industry Manual and State agencies. We continue to update the list of assigned operators as new information is obtained.
In order to make an assignment using the criteria I described above, we must perform two separate operations: reviewing Social Security earnings records which contain each miner's individual employment history; and matching that history against the lists of signatory coal operators and related companies. We then use the assignment criteria in the Coal Act to assign miners to the responsible signatory company. As an aside, I might mention that retrieving these records was a labor-intensive operation, as earnings in formation is only electronically available beginning with wages reported for 1978; earlier earnings information is maintained on microfilm and requires a manual search for earnings information dating as far back as 1946.
If a signatory operator is no longer in business. we must determine whether there is a company which, as of July 20, 1992, or, if earlier, as of the time immediately before the operator ceased to be in business, was "related" to the signatory operator. If so, and if the related company is still in business, it becomes responsible for the beneficiary's premiums.
There are now 57,861 coal miners assigned to 399 coal companies. The 57,861 figure includes miners assigned to companies that voluntarily accepted assignments. An additional 20,720 miners are in the unassigned category. The 20,720 figure includes those miners from companies that have been identified as meeting the criteria established by the Supreme Court's decision in Eastern Enterprises v. Apfel (Eastern). I will discuss the Eastern decision shortly.
Review of the Assignment Decisions
SSA's third responsibility under the Coal Act, which turned out to be very complex and time consuming, was to review each of the individual assignments, if requested by a coal operator. The law provides that an assigned operator may, within 30 days of receipt of the ass ignment notice, request detailed information from us as to the work history of the miner and the basis for the assignment. The assigned operator then has 30 days from receipt of that additional information to request review of the assignment. The statute requires the operator to provide evidence constituting a prima facie case of error in order to have the assignment reviewed, SSA promulgated regulations governing reviews in 20 C.F.R. 422.601-607.
After the initial assignment notices were sent to the assigned operators, operators requested over 54,625 earnings records (due to reassignments to another company, a miner may have more than one earnings record request), as well as the basis on which the assignments were made.
To date, SSA has reviewed assignments for approximately 665 coal operators concerning assignments for 36,256 miners. (The miner count includes some miners who are counted more than once, as these miners had more than one review request filed on them, and the coal opera tor count includes companies relieved of assignment responsibilities.) The review requests were based on a wide range of allegations. For example, some companies claimed they were: never in the coal industry; never a signatory to a coal wage agreement; never a related company; or no longer in business.
As mentioned. the review process can be very complex and time consuming , and because of the difficulty some operators were having in securing evidence, they requested , and were granted, up to an additional 240 days to submit evidence to support their protests, In many situations the evidence submitted is difficult to interpret. Many of the documents were court orders. legal bus iness tran saction papers, busine ss permits. contracts, and pages from old business publications. In addition, it was necessary to contact various organizations and agencies to determine the status and relationships of numerous companies. These contacts included State agencies, business bureaus, and public libraries. We also contact the UMWA Funds to verify signatory agreements, dates of the agreements, and coverage status of employees.
Those companies which were found not to be eligible for assignment were relieved of responsibility for all miners. These miners, as well as miners who were assigned to companies incorrectly , were reassigned to another company, or placed in the unassigned pool.
SSA has reached a sixth round of assignments. These 440 assignments, along with any reassigned miners resulting from the recent Supreme Court decision that I will discuss shortly. will no doubt generate additional reviews. Additional assignment rounds will result from the Supreme Court decision as well as from any miner assignments SSA reverses because of a review. Another factor that must be considered are cases currently in litigation. Twenty-one of the 40 cases that have been filed with the Federal courts are still pending. Since a number of companies involved in these court cases have recently had their miner assignments voided because of the Eastern decision, there is an expectation that the current pending court case workload will decrease. However, there is the unknown factor of additional court cases that may result from the Eastern decision.
Cost of SSA Workloads
The Coal Act did not provide funding for SSA to perform the work required. By law, SSA cannot use trust fund monies for work which is unrelated to Social Security programs. For this reason, SSA requested, and Congress provided, a supplemental appropriation of $10 million for Fiscal Year (FY) 1993 to give SSA the necessary initial funding for this work. The funds were adequate to complete the assignments and begin the reviews. Congress also approved a change to SSA's 1994 administrative funds to carry out the requirements of the Coal Act and provided for reimbursement to the Social Security trust funds on funds expended on this process, with interest, not later than September 30. 1996.
SSA spent $3.7 million in FY 1993, and carried over $6.4 million into FY 1994. SSA spent another $5.4 million in FY 1994, and carried over $0.9 million into FY 1995. Congress provided $10 million to fund coal mine health care activities in both FYs 1996 and 1997. SSA spent $2.4 million in FY 1996 and $0.8 million in FY 1997. Additional funds were not requested for FY 1998 and FY 1999 because the funding appropriated in FY 1996 and FY 1997 will remain available until expended.
Supreme Court Decision
On June 25 of this year, the Supreme Court, in Eastern Enterprises v. Apfel, held the Coal Act unconstitutional as applied to Eastern Enterprises. SSA had assigned miners to Eastern based on the Coal Act's third assignment priority; that of assignment "to the signatory operator which employed the coal industry retiree in the coal industry for a longer period of time than any other signatory operator prior to the effective date of the 1978 coal wage agreement." The Supreme Court found that the application of this third assignment priority to Eastern was unconstitutional and remanded the case to the United States Court of Appeals for the First Circuit.
Needless to say this has generated much work for SSA, Of immediate concern was the effect of the dec ision on current court cases, The Department of Justice and SSA's Office of General Counsel have provided advice to SSA on the legal interpretation of the Eastern decision. As a result we found that six of the pending court cases protesting their assignments under the Coal Act were similar enough to Eastern to warrant the voiding of their miner assignments.
As you can imagine, a number of assigned companies have written SSA to request that we void their miner assignments on the basis of the Eastern decision.
SSA, working with the Department of Justice and the UMWA Funds, has identified 124 companies that were in a situation similar to Eastern's as described in the Supreme Court decision. These companies will not be billed in the UMWA Funds' October 1998 billing. The 6,167 miners formerly assigned to these companies currently have been placed in the unassigned pool. This will enable the Department of Interior to transfer funds from its Abandoned Mine Land Reclamation Fund to the UMWA Funds for these miners and dependents, the same as they do for the other miners and dependents in the unassigned pool. SSA will re-evaluate these newly unassigned miners to determine if they can be assigned to another eligible coal company under the remaining va id assignment rules of the Coal Act.
We will continue our efforts to identify companies which were assigned miners under th at portion of the assignment scheme of the Coal Act that the Supreme Court has decided is unconstitutional and to take the appropriate actions.
In conclusion, Mr. Chairman, you can see that we have accomplished much but still have more to do. While we are taking actions in light of the Eastern decision, there is more work to be done. Additionally, there are other court cases that need to be resolved and miner appeals to be reviewed. I would be happy to answer any questions you may have.