regulation, as whim may direct, does not seem proper to me, because Secretaries are human, as you and I are, and there are even some prejudices, at times. It could be that, in some instances, they just may not care to have as strict compliance as in others. As cheap as printers' ink and paper happens to be, and if it was not cheap this Government would have been a broke a long time ago, it seems to me we could be a little more specific and say that this shall be filed, that shall be filed, and the other thing shall be filed. I think the more Government the representatives of the people retain for themselves, the longer people will have rights. I do not see anything wrong with that kind of thinking. Do you not think we could get what you might call a framework of questions that would bring forth the information we desire without turning anyone loose, unbridled? Mr. ORLOFF. Mr. Chairman, I wrestled with the same problem, and I am satisfied that you cannot get a form that will disclose the information which you want. That is why I went to this alternative method of giving the commission, without designating under whose jurisdiction it shall function, authority to inquire into any aspect of the operation of a plan resulting from any communication which it receives. Chairman BARDEN. Let us see if we can have you clear me up a little bit. Do you agree with me that we should remove the fog now existing around this so-called doctrine of preemption in this field to where the States could normally function in the field of insurance and welfare funds as they function in any other field of insurance? Mr. ORLOFF. I would prefer not to take a position on that question, sir. Chairman BARDEN. May I follow that question by asking you this question: Do you expect all of the policing of this to remain in the Federal Government? Mr. ORLOFF. Under the suggestion which I am making, it is immaterial whether the commission be a Federal commission, a federally established commission, or whether each State establishes a commission. It is immaterial because the commission will deal only with those complaints that are filed with it, and the same complaint would not be filed in a number of places. It would not be necessary. Chairman BARDEN. In other words, you believe that somewhere along the line we should begin to say to a Government agency that is in possession of certain information that that Government agency shall make it available to other governmental agencies, both State and Federal, instead of calling upon the taxpayer or the welfare fund to take from its till and pay all of that expense of handling this. Mr. ORLOFF. That is correct, sir. Chairman BARDEN. I believe I am interested in that. Mr. Wier, does that not make sense to you? Mr. WIER. I am led to believe that regardless of the Government there are these disturbing questions of management of union welfare funds which pop out in your State, my State or the other States, which I think they will move the legislatures to correct them, as is being done. I am surprised that while we have only 3 States that enacted the legislation we had 8 that went into the field. Chairman BARDEN. What I had in mind, Mr. Wier, was this item of some type of cooperative arrangement specified whereby, for in stance, any report that the Labor Department has would be made available to the Revenue Department, if the Revenue Department wanted a report of that kind, instead of the man having to build another one and having to send it in. Mr. WIER. What you lose sight of, Mr. Chairman, is the fact that the Federal Government is now in this picture and has been since 1947 by that provision of the Taft-Hartley Act which, I assume, will remain in the Taft-Hartley Act, pertaining to this reporting authority. There will still be the problem between the States and the Federal Government. I do not think the Taft-Hartley Act sets up a penalty. It only provides that you make the financial reports. Then it sets up the rules over welfare funds that come into being. But it does not, in any way, sense, or manner do what is being attempted here in the Congress, to go as far as insurance laws go. You are going to have conflict. Chairman BARDEN. Well, of course, we are not going to be able to pass a law that will stop all stealing or mishandling of funds. We never have been able to do it, even with banks, and I think they are about as closely guarded as anything you can point out in this country. Yet the bankers' associations have about as big a representation in the Atlanta Penitentiary as any group I know. It is not in excess, but I think it is a normal percentage. I think we are attempting to approach this with the idea in mind that we are going to bring about perfection, but I do not expect that. Mr. WIER. If I can be so bold as to say, in 1947 the Congress took those steps, steps that you rather object to now, in the Taft-Hartley Act, for supervision of the union funds. That is, supervision to the extent that a report shall be made by the recording secretary of the union and filed, not only by the treasury of that union. The provision on welfare funds came into the act, too. Chairman BARDEN. Well, of course, there is not a single word in the law that prohibits making them public. You and I both know where the opposition came from that caused them not to be public. Then when somebody was caught with a whole pile of reports that should have been published, they began to scramble for some excuse not to make them public. Maybe that would have helped some and maybe not, but at the same time I repeat my misgivings about too much law being the remedy. Mr. WIER. Again, there is a weakness in the law at this stage, because under the Taft-Hartley provisions of welfare funds and union treasuries, it only applies to those unions engaged in interstate and foreign commerce, as they call it. It would not apply to intrastate unions over which the National Labor Relations Board and the Secretary of Labor are not assuming any authority. Chairman BARDEN. My prediction is this, and I think there is some basis for it, that unions and their funds, including the PAC, are going to continue to do about what they please with the funds they get. It does not make any difference how much law you give the Secretary of Labor. They are going to continue to handle them. Of course they have helped the economy in my section once or twice. They have never harmed me very much. Mr. House, have you any questions? Mr. HOUSE. I would like to ask a number of questions. Mr. Orloff, your firm handles, among others, welfare and pension funds which operate in the State of New York in part or in whole, is that right? Mr. ORLOFF. That is correct. Mr. HOUSE. On behalf of those funds, you do file the reports that are required by the State of New York? Mr. ORLOFF. If you are talking about welfare funds, Mr. Blomquist is manager of our welfare department. I would prefer to have him answer. Mr. BLOMQUIST. Yes, we do file reports to the State of New York as required by that law. Mr. HOUSE. I think you have given me here the report filed by the boilermakers national health and welfare fund of Chicago, Ill., in the State of New York, a fund with assets of about $1.5 million, this being substantially the amount of annual cash contributions! Mr. BLOMQUIST. That is correct. Mr. HOUSE. I would like to make that report which you furnished me a part of the record. (The document referred to follows:) STATE OF NEW YORK INSURANCE DEPARTMENT Annual report filed with the Superintendent of Insurance for the calendar year 1956 or the fiscal year ended September 30, 1956, Boilermakers National Health and Welfare Fund, 231 South La Salle Street, Chicago 4, Ill., pursuant to Article IIIA of the New York insurance law March & McLennan, Inc., Administrator; March & McLennan, Inc., board of trustees, Boilermakers National Health and Welfare Fund, fiscal officer. (See Note 1.) NOTE: The data contained herein is for the purpose of providing general information as to the condition and affairs of the fund. The presentation is necessarily abbreviated. For a more comprehensive treatment, refer to the annual statement, copies of which may be inspected at the office of the fund, or at the new York State Insurance Department, Welfare Fund Bureau, 61 Broadway, New York 6, N. Y. INSTRUCTIONS (1) All data in the annual report is to be copied or compiled from the annual statement. (2) The annual report is required to be filed, in duplicate, not later than March 1, 1957. Address replies to New York State Insurance Department, Welfare Fund Bureau, 61 Broadway, New York 6, N. Y. ANNUAL REPORT OF THE BOILERMAKERS NATIONAL HEALTH AND WELFARE FUND Condensed statement of assets, liabilities, and unassigned funds Assets: Invested assets__. Cash.. Contributions from employers and employee-members due and unpaid, including $ none more than 2 months past due_____ Other assets purchased interest_ Total______ Liabilities and unassigned funds: Reserves for benefits not insured.. Total_ 1 See note 1. 2 See note 3. See note 4. $887, 390. 63 507, 303. 48 (1) 55.84 1,394,749.95 None 1, 206, 983. 97 187, 765.98 1, 394, 749.95 Summary of operations 1. Contributions from employers---- 2. Contributions from employee-members--- 3. Interest, dividends, and real estate net income_-_. 4. Profit on disposal of investments-- 5. Increase by adjustment in asset values of investments___ 6. Dividends and experience rating refunds from insurance companies in connection with member benefits___. $1, 543, 630. 64 None 9, 983. 35 None None 120, 313. 00 None None None 1,673, 926. 99 Total_ 11. Premiums and annuity considerations to insurance companies for member benefits__ 12. Benefits directly provided to members.. 13. General expenses-- 14. Loss on disposal of investments--. 15. Decrease by adjustment in asset values of investments----Other: 20. Net increase or decrease before reserves (line 10 less line 19)_ 21. Increase or decrease in reserves for benefits not insured----- 22. Net increase or decrease after reserves (line 20 plus Unassigned funds account: 23. Unassigned funds at beginning of year... 935, 201. 19 None 1 102, 196. 17 None None None None None 1,037, 397. 36 636, 529. 63 None 636, 529. 63 None 636, 529.63 None 448, 763. 65 None 187, 765.98 $53, 457.25 18, 811. 20 26, 833, 40 3,094. 32 102, 196. 17 Experience under insurance contracts (based on information obtained from insurance companies) 1 The figures shown here for the policy year ending Jan. 31, 1956, are inclusive from the inception date of the policy which was Aug. 1, 1954. 2 The polio coverage was added on Feb. 1, 1956. There has been, therefore, no completed policy year at the time of this reporting and we can supply no figures until the next renewal date. NOTE. The foregoing exhibit is on a policy-year basis and normally will not agree with amounts on p. 4 NOTES TO ANNUAL STATEMENT AND REPORT Note 1. All books of account for the Boilermakers National Health and Welfare Fund are maintained by the administrator, Marsh & McLennan, Inc. These books consist of the following: 1. General ledger 2. General journal. 3. Cash receipts. 4. Cash disbursements. All contributions are received by the administrator and deposited in the Continental Illinois National Bank & Trust Co., of Chicago, Ill. The administrator can only deposit the contributions, it cannot withdraw any funds. The only authorized check signers on the fund are the chairman, the vice chairman, the secretary, and the assistant secretary, of the board of trustees of the Boilermakers National Health and Welfare Fund. It is required further that one signature on all checks, contracts, and/or documents be that of an employer representative and the other be that of a union representative. Note 2. All records are kept on a cash basis. Therefore no accruals are set up for employer contributions. It will be noted that our auditors, Price, Waterhouse & Co., set up as note 1 to the financial statement in the audit report (copy enclosed) that approximately $175,000 was received after September 30, 1956, for hours worked in the month of September, 1956. In addition, the auditors showed in note 1 to the financial statement that there was an estimated premium rate return of $120,000 outstanding at September 30, 1956. The actual computation of this premium rate return will not be made until the end of the related policy year which is February 1, 1957. Note 3. Of the cash in the bank on September 30, 1956, approximately $290,000 was earmarked for insurance premiums due November 1, 1956, for all eligible employees whose eligibility is based on the hours they worked in the months of July, August, and September, 1956. In addition, there was $19,000 earmarked for administrative and legal fees incurred in the 3 months of July, August, and September, 1956. The trust agreement provides for the creation of such reserves as the trustees deem necessary to maintain policies or contracts of insurance for benefits provided by the trust and to meet the operating and other expenses of the fund. The amount of such reserves provided at September 30, 1956, is $897.983.97, which is represented by the investment in United States Government securities and the income earned thereon. Note 4. Receipts during the fiscal year exceeded expenditures by $187.765.98. This money was put into broadening of the fund by the reduction of the eligibility rules and increase in the benefits. The reduced eligibility rules became effective October 1, 1956. The increased benefits became effective February 1, 1957. The eligibility requirements were reduced from 275 hours a quarter and 1,100 hours a year, to 250 hours a quarter and 1,000 hours a year. The benefits were expanded to include 70 days of hospitalization per claim rather than 31 days per claim; the dollar amount of dependent benefits was raised to the same level as employee benefits; and provision was made for unusual maternity. Note 5. The fund maintains three accounts with the Continental Illinois National Bank & Trust Co. A. Checking account-All accepted employer contributions and premium rate returns (if any) are deposited to this account. It is subject to withdrawal by check as outlined in note 1 above. All expenditures are made from this account for the operation of the fund. B. Custodian account.-All interest payments on the Government securities owned by the fund are collected by the bank and deposited in this fund. The trustees from time to time reinvest this money in additional Government securities. This account is subject |