Mr. IVES, from the Committee on Labor and Public Welfare, submitted the following REPORT [Pursuant to S. Res. 225] I. INTRODUCTION A. BACKGROUND AND AUTHORITY OF THE SUBCOMMITTEE n January 11, 1954, the President sent to the Congress his legise recommendations on labor-management relations. Included in Presidential message was the following statement: e act (Labor Management Relations Act, 1947) presently prohibits an emr from making payments to a union to assist in the financing of union welfare unless the fund meets certain standards. These standards are not adequate otect and conserve these funds that are held in trust for the welfare of indil union members. It is my recommendation that Congress initiate a thorstudy of welfare and pension funds covered by collective bargaining agree3, with a view of enacting such legislation as will protect and conserve these for the millions of working men and women who are the beneficiaries. bsequently the chairman of the Senate Committee on Labor and ic Welfare (Mr. Smith of New Jersey) introduced Senate Resolu225, which reads in part as follows: olved, That the Committee on Labor and Public Welfare, or any duly authorbcommittee thereof, is authorized and directed to make a full and complete and investigation with respect to the establishment and operation of em= welfare and pension funds under collective bargaining agreements, for the se of ascertaining whether legislation is necessary for the conservation of unds and the protection of the interests of the beneficiaries thereof. e resolution was unanimously reported by the Committee on rand Public Welfare on April 1, 1954. On April 28, the Senate d to Senate Resolution 225, with the authority so granted to e on January 31, 1955. e chairman of the Committee on Labor and Public Welfare nted the following as members of a subcommittee to conduct -udy: Senator Irving M. Ives, chairman Senator William A. Purtell Senator Matthew M. Neely Subsequently, the chairman of the Subcommittee on Welfare and Pension Funds (Mr. Ives of New York) introduced Senate Resolution 270, which amended Senate Resolution 225 by broadening the investigation to include "plans and funds subject to collective bargaining. The subcommittee has operated under the authority of Senate Resolution 225, as amended, and the Legislative Reorganization Act of 1946 (Public Law 601, 79th Cong. 2d sess.). Section 134 (a) of Public Law 601 empowers the subcommittee to hold hearings, to issue subpenas requiring the attendance of witnesses and the produc tion of documentary evidence, and to make investigations into any matter within its jurisdiction. B. SUBCOMMITTEE OBJECTIVES The basic responsibility of the subcommittee is to recommend to the Congress remedial legislation designed to conserve the funds and to protect more fully the interests of the beneficiaries of employee welfare and pension plans. The subcommittee felt that this objective could only be attained after a thorough, impartial, and objective investigation into the establishment and operation of such plans. Employee benefit plans fall into two primary classifications: (1) pension. plans and (2) welfare plans providing partial protection against the risks of death and disability (including wage loss). For this reaso the subcommittee had to make a determination as to the type of plan to which it would devote the major share of its preliminary invest gation. Studies which had been conducted by various State and Federal agencies indicated rather conclusively that the incidence of abuse was greater in the administration of welfare as distinguished from pension plans. Accordingly, the subcommittee decided to devote the major part of its time to a study of welfare plans, following which it was hoped and expected that an equally intensive investigation would later be made into the establishment and operation of employee pension trusts which represent a sizable but separate phase of the private employee benefit program. any, It became apparent at the outset that very little, if valid information was available concerning the actual operation and administration of welfare plans. The subcommittee found, for instance, that several Federal agencies had certain statutory responsi bilities concerning various aspects of these plans, but no single agenc had complete responsibility for collecting and analyzing curren statistical data or reporting on current developments. Because suc information was a necessary prerequisite to an intelligent consideration of corrective legislation, the subcommittee decided that its investig tion should have a threefold purpose: (1) To trace the development and present status of employ: welfare and pension plans; (2) To ascertain the nature, extent, and incidence of abuse and improper practices in the administration of the plans; and (3) To ascertain the scope and effectiveness of existing public and private regulatory controls over the operation of such plans. It is the subcommittee's purpose to make these preliminary findings fact and, if corrective legislation is deemed necessary, to use that formation as the basis for recommending corrective standards. . DEVELOPMENT AND PRESENT STATUS OF WELFARE AND PENSION PLANS Employee welfare and pension plans have developed to the point here they now constitute a significant and important factor in our tional economy. The problem is complex by its very nature and s been further complicated by the phenomenal growth of employee nefit plans during the past 10 years. Consequently, it is felt that understanding of the present problems faced by labor and manage-nt in the administration of this program can be gained only by _cing its evolution in proper perspective. Today, welfare and pension plans are part and parcel of the entire oric of wages and working conditions in an employee's "contract employment." While many of these plans have been and are tiated and sponsored unilaterally by management, they are subject collective bargaining where employees are represented by a bargainagent. In order to place them in their proper perspective, the committee has studied their historical development and their racteristics. A. EVOLUTION AND DEVELOPMENT During the early part of the 19th century some unions were paying kly unemployment benefits to their members. Such a program s established in 1831 by the printers' union in New York. During latter part of the 19th century, various unions throughout the ntry established benefit programs for their members in an effort safeguard the economic interests of workers confronted with such blems as unemployment, disability, old age, and death. These rts to provide some sort of security for the worker often took the n of employee mutual benefit associations, which usually provided y sickness and death benefits. Management also took an interest he problem at this time, for in 1870 the first known profit-sharing 1 was established by Brewster & Co., carriage builders in New k City. This was followed in 1875 by the establishment of the industrial pension plan by the American Railway Express Co. he first group life insurance plans for workers were established durthe period 1910-12 and these were followed during the period 1916y unemployment and guaranteed employment plans. Group sickand accident insurance dates back to 1914 but its growth was relaly slow for many years. However, in 1942 Rhode Island enacted mpulsory temporary disability benefit law providing for insurance ugh a State fund. California followed in 1946, New Jersey in , and New York in 1950. The latter three laws encouraged the 56385-55- -2 development of those privately insured or self-insured plans wh satisfied the statutory requirement. The tremendous growth in group health protection dates from th beginning of the first Blue Cross plan in 1932 although there were sor health plans in the Pacific Northwest prior to 1900 for employees the mining, railroad, and lumber industries. On the other hand, B. Shield plans covering the costs of surgical care are relatively new. A though the first Blue Shield type plan was established in 1939, the œganization known as Blue Shield Plans for Medical Care was not orga ized until 1946. At about the same time insurance companies starte. to write group medical-expense insurance providing for reimburseme of charges for physicians' services in the home, office, plant, and b pital. More recently insurance companies have begun to write maj medical-expense (catastrophic) coverage. With the cooperation of the American Life Convention, the L Insurance Association of America, and other industry groups, committee obtained replies to questionnaires on all union welfare plaza and funds purchasing all or part of their benefits from commercia insurance companies. Much of the data in these questionnaires has been summarized elsewhere in this report but the following table pr vides some information concerning the unions most frequently i volved and the size of their welfare fund premium commitment during the policy year 1952-53. TABLE I.—Insurance policies, by union, policy year 1952-53 B. SIZE AND SCOPE OF GROUP EMPLOYEE BENEFIT PLANS Private benefit plans to meet the economic hazards arising out of death, old age, and sickness are more extensive in the United States than in any other country in the world. Originally, the protection was purchased by individuals but within recent years there has been an extensive development of group protection. Employer and unor plans were part of the development of group protection, and collectively bargained plans were but a further evolution of the growing emphasis on such plans. Approximately two-thirds of the sickness and accident and 80 percent of voluntary health insurance coverage is obtained through group enrollment and most of the group enrollment is connected with the employment of the individual. insurance companies. 1 Most welfare plans and funds are insured plans, i. e., the fund trustees buy policies from one or more policies from hospital (or medical) service corporations such as Blue Cross agencies. Finally, a small The insurance companies then provide the benefits. Many funds, however, baş increasing number of international and local union funds "self-insure" (or self-administer) their wear benefits. It is to be regretted that the subcommittee was not able to secure information on the self-insured funds and those providing benefits through nonprofit medical service corporations. No exact information is available concerning the total employee verage under benefit plans which are collectively bargained. The st available information indicates, however, that as of mid-1954 at st 11,290,000 workers were covered by collectively bargained wele and pension plans. This represents an increase of more than 47 cent in the worker coverage under collectively bargained groupnefit plans since mid-1950. Over 98 percent of the 11,290,000 workers are now covered for wage ses resulting from sickness or accident, as well as medical care and th benefits. About 64 percent of the 11,290,000 workers covered also enjoy retirent benefits. Most of these collectively bargained plans are financed by the emyers who completely underwrite over 62 percent of the welfare ns and almost 85 percent of the pension plans. The following table strates employee coverage and methods of financing welfare and sion plans under collective bargaining during the period 1950-54. TABLE 2.-Coverage of health, insurance, and pension plans under collective bargaining, 1950-54 ce: Bureau of Labor Statistics, U. S. Department of Labor. Survey of all national and international (AFL, CIO, and independents) and single-firm unions with 1,000 or more members. Excludes of railroad and Government employees. OLLECTIVE BARGAINING AND OTHER FACTORS AS MOTIVATION FOR ere is evidence that some collectively bargained benefit plans |