May 24, 1989 EXTENSIONS OF REMARKS 10163 EXTENSIONS OF REMARKS SECTION 89: WHAT STAFF HATH with a fair and equitable tax code, Section Mr. Conaway's duties is to consult on Sec­ CREATED, CONGRESS SHOULD 89 has effected an erosion of each. These tion 89, and to receive early intelligence TAKE AWAY are the kinds of unintended consequences from his erstwhile governmental colleagues we get when a democratic legislative process of further developments in the area. is short-circuited by staff rule, which seems Mr. Mason is now with the Washington­ HON. CHUCK DOUGLAS to attach little weight to public laws public- based law firm of Caplin & Drysdale. Mr. OF NEW HAMPSHIRE ly arrived at. · Mason of course is also touting his Section IN THE HOUSE OF REPRESENTATIVES I know that you, as one of the early spon­ 89 expertise, as is a client consulting group sors of Mr. LaFalce's bill to repeal Section marketing a Section 89 software program Wednesday, May 24, 1989 89, understand these issues. But there is an <at $5,000 a copy), apparently endorsed and Mr. DOUGLAS. Mr. Speaker, one of the aspect to this which is rarely discussed, let recommended by "Kent Mason who wrote tragedies of the section 89 fiasco has been its alone publicly, although disturbing in the Section 89". CSee attached HRCG market­ use by staff for a well paid exit to unravel the extreme and perhaps relevant to Congress­ ing memorandum]. mess they created. Section 89 reminds me of man Frank's scheduled hearings this week Stories like this are no longer rare, and in concerning ethics in government and con­ fact are getting all too common. the old Chinese proverb that success has a flicts of interest. In their pupal form as Treasury or com­ thousand fathers but failure is an orphan. The Some of us are persuaded that employee mittee staff, these guys wage unrestricted orphan is well described in a brilliant expert benefits legislation <and ancillary regula­ class warfare against the so-called "highly analysis by Attorney Alan Cleveland of my tion) is drafted in part by staffers to be pur­ compensated" with absolute impunity. They State in a review requested by me concerning posely arcane and complex. This virtually are virtually invisible-except to a tiny this disaster to small business. I insert rele­ guarantees the draftsmen's entree into pri­ cadre knowledgeable in the area. They are vant excerpts of his letter in the RECORD. vate consultancy as highly paid experts unassailable-being unelected and beyond SHEEHAN, PHINNEY, BASS & GREEN, holding the only keys for unlocking the en­ recall even if identified by a victimized citi­ PRoF. Ass'N, igmas they have created. The more compli­ zenry. They are all powerful-deferred to as Manchester, NH, May 17, 1989. cated the law is <hopefully beyond compre­ "experts" by Congress they are licensed to Re Section 89. hension) and the more severe the penalties act in its name as the law of the land. Congressman CHUCK DouoLAs, for noncompliance, the more valuable the However, once having created their per­ Washington, DC. "expertise" of the staffer whose services are sonal regulatory ruble's cube in the name of DEAR CHUcK: Section 89 is the most cur­ now up for bid to the private sector. An ele­ "horizontal equity", they metamorphosize rent and visible example of a staff out of ment of this type of nest feathering has to consultants and move on to the private control, or, as some have more delicately always been with us of course, but never to sector to make a very satisfying living from put it, "a process awry". this degree or on this scale. Given the pain their late victims. Some might call this an As you know, Section 89 as presently in and costs involved, Section 89 is a compel­ ingenious form of parasitism. , effect requires employers who offer employ­ ling illustration of what appears to be an in­ From personal experience, having lec­ ee benefit plans to apply complicated rules creasing abuse in the area. tured many times on employee benefits to either prove these benefit plans are "non­ It is undisputed that two staffers, Harry from Portsmouth, New Hampshire to discriminatory", or calculate the amount of Conaway and Kent Mason, created Section Kansas City, Missouri, to Los Angeles, Cali­ "discriminatory excess benefit" should any 89 between them. No bill was ever filed in fornia, I can tell you the real anguish and of a number of complex tests not be passed. Congress, and no Congressman will admit to incredible cost already inflicted by Section We also discussed the fact that this Sec­ having even suggested the Section 89 con­ 89. Many have contacted their Congressmen tion 89 timebomb was inserted by Congres­ cept. Rather, it was inserted by Messrs. and Senators to beg for its repeal as a horri­ sional staff into the Tax Reform Act of 1986 Mason and Conaway at some point during ble mistake. without the benefit of public testimony, the closed sessions of the tax writing com­ The conventional wisdom of the Beltway without any evidence making a case for any mittee in the latter stages of the Tax however is that is Section 89 is repealed, problems or abuses in the area, and without Reform Act of 1986. It was literally sand­ Treasury, the Joint Committee Staff, and any assessment of the extraordinary costs, wiched in with thousands of pages of text of Mr. Rostenkowski will make good on their difficulty, and disincentives to small busi­ tax changes as a packaged deal. Discrete voiced threat to exact extreme retribution ness in compliance. The implied public floor change was an option not permitted elsewhere in the employee benefits area. policy behind Section 89 is that employee our elected officials. [See Wall Street Jour­ These guys are so powerful and beyond the benefits would somehow be made more nal article of 8/29/88 "Nuking Employee reach of Congress, that those lobbying available to the workforce, and that federal Benefits", and the 1/26/89 piece, "Rosty's against Section 89 right now are bending revenue would be increased by penalties im­ Albatross". Also see enclosed copies of an over backwards not to antagonize this clique posed on employees and employers for non­ article co-authored by Messrs. Conaway and if it can possibly be avoided. Even so, we compliance.· Mason in the Benefits Law Journal <Spring know that they will have their way, that a So what is happening in the wake of this 1988), and an illuminating interview with penalty will be exacted in the employee ben­ hidden timebomb? First, health benefits to Harry Conaway in that same issue of Bene­ efits area <to "pay" for the alleged revenue employees are being cut back, put on hold, fits Law Journal.] loss of repealing any part of Section 89) and or dropped altogether. Second, the tax-de­ Of special interest is a transcript of the that Congress will surely vote whatever om­ ductible fees and costs of Section 89 compli­ U.S. Chamber of Commerce televised pro­ nibus bill these guys choose to encapsule ance being paid to assorted consultants, law­ gram of March 22, 1989, which involved a that retribution. yers and accountants in fact exceed any panel discussion of Section 89 with Dr. As a sample of the transparent attitude of extra revenue projected by this "revenue Lesher of the U.S. Chamber of Commerce, this bunch, you might want to scan the dis­ enhancer. Third, and most troubling, many Representative LaFalce, Harry Conaway cussion starting at page 27 of the enclosed honest, law-abiding employers now covering and Kent Mason as participants. You may "Code Section 89 Simplification (Descrip­ employees with non-discriminatory benefits note that both Mr. Conaway and Mr. Mason tion of H.R. 1864)", prepared by the Staff of intend to disregard Section 89 altogether as are introduced as "formerly" staff members. the Joint Committee on Taxation April 25, unfair, illegitimate, and impossible to Mr. Conaway is now with the Washington 1989, to explain Mr. Rostenkowski's bill. comply with anyway. This resulting con­ office of Mercer-Meidinger <that same firm The party line of course is that there are no tempt for our laws does not reflect well on which beautifully analogized Section 89 as defects to Section 89-rather, there is only a the tax changes made by Congress, and, "dropping an atomic bomb on a suspect ant fuss caused by what "employers argue". A ironically, undermines the equity argument hill-and missing the ant hill"). To add ad­ killer argument put forth by Staff is the on which the Tax Reform Act of 1986 was ditional luster to its enviable reputation in last paragraph of its "explanation", and can sold to the American people. the employee benefits field, MMH hired Mr. be found at page 36: "Some employers have Instead of more health benefit coverage, Conaway to serve in its Washington-based already incurred significant expense to more federal revenue, and more compliance "government liaison department". Among modify their benefits plans to comply with • This "bullet" symbol identifies statements or insertions which are not spoken by a Member of the Senate on the floor. Matter set in this typeface indicates words inserted or appended, rather than spoken, by a Member of the House on the floor. 10164 EXTENSIONS OF REMARKS May 24, 1989 the present law. They argue that they its legislative responsibilities in this area, SYNOPSIS should not be disadvantaged by any changes and limit the executive branch to the dis­ Merchant Marine and Defense Act of to Section 89." charge of its regulatory responsibilities.