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Orrin Hatch Pushes Plan to Reform Public Pensions After Detroit Bankruptcy.


Image: Orrin Hatch Pushes Plan to Reform Public Pensions After Detroit Bankruptcy

Senator Orrin Hatch is pushing an overhaul of public pensions that would let life insurers grab a bigger share of the $3 trillion in state and local funds, a potential windfall for companies such as MetLife Inc. and Prudential Financial Inc.

Public pensions invest their money with asset managers and use gains to help pay benefits. Under Hatch’s proposal, they could choose to give their funds to insurance companies, which would take responsibility for making payments when workers retire. The Utah Republican has seized on Detroit’s July 18 bankruptcy to highlight budget deficits and ballooning debt that threaten payouts by municipalities.

Taxpayers and workers pumped more than $126 billion into public retirement systems last year, Census data show. Hatch, the top Republican on the Senate Finance Committee, says shifting investment risk to insurers will make the pension system stronger and more efficient, even as the industry’s financial vulnerability was exposed by the credit crisis five years ago and the record-low interest rates that followed.

“Senator Hatch’s plan is built on false assumptions,” said New York City Comptroller John Liu, who oversees the city’s $137 billion retirement system and is running for mayor. “Public pension funds are far more cost effective and secure than for-profit insurance companies, which have to answer to shareholders first and not the pension beneficiaries or taxpayers.”

Insurance Contracts

Hatch’s plan calls for workers to receive a type of insurance contract called a fixed annuity that guarantees employees on retirement a lifetime stream of income in exchange for upfront payments. They can only be issued by licensed insurance companies, which are regulated by states where they do business. Public pensions are primarily overseen by state laws, local ordinances and IRS rules.

The bill would give insurers a new avenue of growth as they’ve struggled to properly price annuities amid rock-bottom interest rates and stock-market swings, and as investment firms including Leon Black’s Apollo Global Management LLC and Phil Falcone’s Harbinger Group Inc. have entered the business. It would also boost sales of a relatively new insurance product known as a deferred-income annuity, which can accept multiple premiums during a career and guarantee lifetime payouts at a future date.

‘New Business’

“I know some will argue my bill will give too much new business to the life insurance industry,” Hatch said in a statement. “The way I see it, my bill takes advantage of the life insurance industry to help Americans solve a serious pension problem.”

While Congressional gridlock renders it unlikely that Hatch’s bill will pass this year, it shouldn’t be dismissed, said Derek Dorn, a partner at Davis & Harman LLP in Washington who specializes in tax and retirement policy. Hatch would have a chance to push the bill should his party gain the majority in the Senate after the 2014 elections.

Hatch’s plan would raise costs for public workers and increases the potential for “other AIG-type situations,” said Dean Baker of the Center for Economic and Policy Research, which gets money from unions. American International Group Inc., once the world’s largest insurer, got a $182.3 billion taxpayer- funded rescue in 2008. Hartford Financial Services Group Inc. and Lincoln National Corp. also received rescue funds. The companies have repaid the aid.

There is precedent for losses from insurance company busts. Executive Life Insurance Co., at one time the largest life insurance company in California, collapsed in 1991 under a load of junk bonds, spurring losses for some policyholders.

Insufficient Contributions

Hatch’s proposal doesn’t address a key weakness in the public pension system: the past underfunding by state and local governments that routinely failed to set aside enough money for benefits in order to free up money for other programs. Many municipalities were forced to pump more money into retirement plans after the 2008 financial crisis. The move by Detroit to file for the biggest municipal bankruptcy in U.S. history may cut retirement benefits of 30,000 current and former workers.

“Where we have pension-funding issues in the public sector, it’s not because of exposure to risk,” said Steven Kreisberg, collective bargaining director for the American Federation of State, County and Municipal Employees. “It’s simply because employers have failed to make contributions that they should have made.”

Investment Assumptions

Public pension benefits in the U.S. are administered by 2,500 retirement systems, covering 15 million working and 8 million retired employees, according to Census data. Most have struggled to meet their retirement liabilities as assumptions that their investments would earn 8 percent a year have proven to be too high. In 2012, contributions from public agencies were only about 80 percent of what they should have been to ensure that there will be enough to pay out all the promised benefits, according to the Center for Retirement Research at Boston College.

The bill is designed to prevent public agencies from underfunding their pensions in the future by letting them buy annuities for workers upfront, according to Hatch’s office. That would force the funds to recognize the full cost of those liabilities and prevent them diverting money to other projects, which means the number of states or municipalities opting to do it “will be precisely zero,” said Jeffrey Brown, a finance professor at the University of Illinois.

The bill makes it easier for state and local governments under the federal tax code to shift the risk of future pension benefits to workers from taxpayers, which may help it gain support, said Ben Harris, senior research associate at the nonpartisan Tax Policy Center.

Compromise Possible

“There may be room for compromise,” Harris said. “Senator Hatch and the White House are both looking at ways to induce employers to offer lifetime income or annuities to workers.”

The Treasury Department proposed regulations last year to make it easier for people to fund an annuity through their company-sponsored pensions or 401(k) savings accounts in an effort to help retirees from outliving their savings.

Under Hatch’s plan, a worker in a public pension would receive a deferred fixed-income annuity contract for each year of service, funded by their employer. Fixed annuities provide a set payout based on current interest rates, the longevity expectations of a pool of workers and other assumptions. Participation by states or municipalities would be voluntary.

‘Looming’ Crisis

Insurers would have to bid annually and offer institutional prices, according to the legislation. Workers would be able to take their benefit guaranteeing future monthly income from job to job. A 30-year employee would have 30 policies at career end, possibly from different providers.

“With cities and municipalities across America – from Chicago to Los Angeles -facing a looming pension crisis, Congress should act now to stop another city bankruptcy,” Hatch said in an e-mailed statement.

Hatch’s pension plan is part of a broader legislation aimed at the U.S. retirement system. Apart from public pensions, the bill also proposes a plan for “Starter 401(k)s” to make savings plans available to more workers at small employers.

Fiduciary Standards

The legislation also weighs in on the battle over the Department of Labor’s efforts to boost financial advisers’ accountability to retirement-plan participants. The bill would strip jurisdiction over prohibited transactions involving self- dealing and conflicts of interest in individual retirement accounts from the Labor Department, which has been pursuing more stringent rules to protect investors, and place it solely with the Treasury Department.

Treasury also would work with the Securities and Exchange Commission in determining professional standards for brokers and advisers for IRA participants.

The Labor Department has been working on a rule since 2010 that would expand the list of those who are liable in retirement plans as a so-called fiduciary. The brokerage industry has lobbied against the Labor Department’s proposal.

Insurers currently play a limited role in public pensions, said Keith Brainard, research director at the National Association of State Retirement Administrators. Some public pensions may outsource disability or death benefits to an insurance provider, he said. Some insurers also act as fund managers for pensions, providing investments in assets such as stocks, bonds and real estate.

BlackRock, Pimco

The vast majority of public pension money is dominated by money managers such as BlackRock Inc., Pacific Investment Management Co. and Vanguard Group Inc., which are selected by the retirement systems. Pensions use these managers to invest in stock and bond markets, as well as non-traditional strategies such as hedge funds, private equity and real estate. Prudential’s investment unit is the only insurance company among the ten biggest institutional-investment managers, according to data from Pensions & Investments magazine.

Hatch’s plan would expand pension assets held by the insurers, which in the past year have taken over retirement liabilities from companies such as General Motors Co. and Verizon Communications Inc.

General Motors struck a deal to shift more than $25 billion in pension obligations to Newark, New Jersey-based Prudential last year. In October, Verizon reached a similar deal to shift about $7.5 billion in pension liabilities to Prudential.

Purchasing annuities will make pension costs for states and municipalities more predictable and help insurers increase revenues, Rokhaya Cisse, an associate analyst at Moody’s Investors Service, said in a July 15 note. The largest life insurers with existing retirement businesses are likely to benefit the most, Cisse wrote. MetLife and Prudential are the largest U.S. life insurers and both sell retirement products.

Wall Street

The plan may also benefit Wall Street firms that have been making acquisitions to expand in insurance. Private-equity firm Apollo, based in New York, and a firm tied to New York- and Chicago-based Guggenheim Partners LLC reached deals in December to buy U.S. annuity units. A firm owned by Guggenheim shareholders on July 31 received approval to proceed with the deal to buy Sun Life Financial Inc.’s unit after agreeing to policyholder protections sought by a New York regulator. Falcone’s publicly traded Harbinger Group bought Fidelity & Guaranty, the U.S. life and annuity unit of London-based Old Mutual Plc, for $350 million in 2011.

The securities and investment industry — a group that includes private-equity firms, life and health insurers — was the top contributor to Hatch’s campaign committee and Leadership Political Action Committee as of 2012, according to OpenSecrets.org. MetLife, the biggest U.S. life insurer, and the American Council of Life Insurers, a trade group, were listed as supporters of the bill in Hatch’s July 9 press release introducing it.

New York

“MetLife has been focused on the retirement income crisis for a number of years and applauds Senator Hatch for recognizing the importance of guaranteed streams of income in retirement that people can’t outlive,” John Calagna, a spokesman for the New York-based company, said in an e-mail.

Prudential, the second largest U.S. life insurer, declined to comment on Hatch’s proposal, according to Bob DeFillippo, a spokesman for the company.

Hatch’s proposal is a departure from how many retirement funds are currently managed in the U.S. Staff in the New York City comptroller’s Bureau of Asset Management, which oversee five funds for police, firefighters, teachers, school and civil- service workers, farm out asset management to more than 300 firms and don’t manage any assets internally. The pension funds don’t invest in annuity contracts to pay retiree benefits. The system has invested with investment-management units of insurers including Prudential, according to a report on its website.

Calpers Model

The city’s pension funds, the 11th largest in the U.S., gained 12.3 percent in fiscal year 2013, according to preliminary, unaudited results, Comptroller Liu said in a July 18 statement. The funds had about 57 percent of their assets in stocks, about 31 percent in bonds and the rest in assets such as private equity and hedge funds, according to its website.

The California Public Employees’ Retirement System, the largest U.S. pension, commits money to hundreds of external asset managers in addition to investment staff who manage assets, said spokesman Joe DeAnda. The fund doesn’t buy individual annuity contracts for workers. The money is invested as a pool and payouts determined by formulas depending on workers’ length of service and job type, according to DeAnda.

Calpers is reviewing Hatch’s proposal and doesn’t have a position on it at this time, DeAnda said. The pension plan had its portfolio invested in a diverse set of assets as of March 31, including about half in public equities, 12 percent in private equity and 8 percent in real estate, according to its website. The Calpers fund earned 12.5 percent in the 12 months ending June 30, according to a July 15 statement.

Executive Life

The collapse of insurance companies such as Executive Life illustrate that pension beneficiaries would be at risk of losing their payouts in retirement if the insurer behind their annuity contracts went out of business, said Teresa Ghilarducci, an economics professor at The New School in New York. Insurers are regulated by states, which vary in their standards, she said.

Executive Life issued group annuities and guaranteed investment contracts to pension plans and municipalities. The estimated loss for contract owners was $3.1 billion and policyholders recovered about 87 percent on average of their expected account values, according to a 2008 report by the California State Auditor.

Insurance companies that go out of business are taken over by a state’s insurance department. Guaranty associations pay the claims from payments required of solvent insurers and provide necessary funding if the policies are moved to a new insurer up to certain coverage limits, which can differ from state to state.

The switch to annuity contracts would carry a cost for workers, Harris of the Tax Policy Center said. Insurance companies on average take out 10 percent to 15 percent of contributions from a group of people to cover costs such as marketing and for taking on the risk, Harris said.

Annuities bought for groups generally have lower costs than those purchased individually. Institutional pricing can vary by an employer’s demographics such as gender, age and location of its workers as well as by the features in the contract including whether there are any payouts to survivors after death.

The argument that accumulating annuities will result in smaller benefits for workers is a myth, according to an e-mailed statement from Hatch’s office. The payouts under the plan can be just as generous and have a financial backstop from the state guaranty associations, according to the statement.

Hank Kim, the executive director of the National Conference on Public Employee Retirement Systems, said it costs 50 basis points to 76 basis points of assets invested to run public pensions. That’s lower than a for-profit insurance company could offer, he said.

“It sounds as if it’s a free lunch — and I really don’t believe in free lunches,” he said. “To say it would cost the same and you would get the exact same benefit, it really stretches the realm of credibility.”

© Copyright 2013 Bloomberg News. All rights reserved.

Source: NEWSmax.com

Hatch to Newsmax: White House Like ‘Despots’ With Holder Move on Civil Rights.


Attorney General Eric Holder’s plan to ask a federal court to reinstate the Justice Department‘s authority over voting laws in Texas smacks of despotism by the Obama White House, Sen. Orrin Hatch tells Newsmax TV in an exclusive interview.

“The court has already ruled — and he’s trying to reinstitute the Voting Rights Act in Texas,” the Utah Republican tells Newsmax. “If I were a Texan, I’d be so doggone livid that I don’t think I’d ever get over it. That’s not the thing to do, and it just shows how this administration ignores the law.

Editor’s Note: ObamaCare Is About to Strike Are You Prepared?

“They act like they’re despots,” he adds. “The president is continuously doing things that he has no authority to do — and yet they just do it and they get away with it because many in the liberal media just will not hold them to account like they would a Republican president.”

Holder said on Thursday the Texas measure was part of a new Obama administration strategy to challenge state and local election laws it says discriminate by race.

“Based on the evidence of intentional racial discrimination that was presented last year in the redistricting case, Texas v. Holder … we believe that the state of Texas should be required to go through a preclearance process whenever it changes its voting laws and practices,” Holder told the annual conference of the National Urban League, a civil rights organization, in Philadelphia.

The White House has been seeking ways to oppose voting discrimination since the U.S. Supreme Court in June invalidated a key part of the 1965 Voting Rights Act.

The 5-4 conservative majority on the high court ruled that a formula used to determine which states and localities were subject to extra federal scrutiny was outdated.

Story continues below video.

The ruling freed Texas and certain other jurisdictions from having to submit their voting laws to the Justice Department before they could take effect.

The covered jurisdictions were mostly in the South, where there was a history of denying minorities the right to vote. Chief Justice John Roberts wrote in the majority opinion that the South had changed dramatically, however.

Hatch, 79, the Senate’s most senior Republican, agrees.

“The Civil War’s been over for a long time,” Hatch tells Newsmax. “We’ve come a long way on civil rights. The states are doing a terrific job in most respects.

“The ones that used to be under the Voting Rights Act provisions — some of the worst states are blue states, where they treat minorities like dirt and don’t take care of them, don’t do what’s right by them — and, frankly, a lot of this liberal stuff comes out of those states,” he says.

Turning his attention to Obama’s newfound interest in resuscitating the nation’s economy, Hatch describes the president’s recent speeches as “déjà vu all over again. He just can’t get away from blaming George Bush and the prior administration for everything.

“How many times have we heard this speech? We’ve certainly heard these failed ideas over and over again over the last four-plus years. They haven’t worked, Mr. President. The American people know they haven’t worked. The president can travel around and give these campaign speeches and blame Congress all he wants.

“The American people are looking for jobs, not more speeches,” Hatch adds. “They’re looking for opportunities for themselves and their families, not more speeches. They want to hear solutions and see the economy improve, not more speeches.

“Here we go again. It’s good to see the president get back in the game — or at least say he’s going to focus on the economy again. The Republicans in Congress have been laser-focused on the economy, so if this is the time the president’s going to actually work with us and try some of our ideas, then great. But I’m certainly not optimistic.”

Hatch, however, is more upbeat about a plan he and Democratic Sen. Max Baucus of Montana plan to introduce Friday to revamp the nation’s byzantine tax code.

“I was pushing pretty hard to start with a blank slate and then see what has to be added to that,” Hatch tells Newsmax. “There’s no bill to mark-up just yet.

“We simply have to redo this tax code. It’s not efficient. It’s not competitive. It doesn’t help job-creators. It doesn’t help hard-working middle-class families. We’ve got a lot of work cut out for us — and frankly, we both agree it should be a revenue-neutral approach.”

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But Baucus has since said that any new tax plan should generate some revenue, Hatch says.

“I guess the leadership in the Democratic Senate got to Sen. Baucus, and he has said there has to be some revenue — but he didn’t say how much or what.”

In fact, Senate Majority Leader Harry Reid of Nevada said on Thursday that he would not participate in the tax-reform negotiations. Both he and another Democratic senator, Charles Schumer of New York, said that raising nearly $1 trillion in revenue should be the starting point for any such talks.

“We’ve already given them $600 billion in taxes in the fiscal-cliff deal,” Hatch says, referring to the January agreement that is expected to bring in revenue over 10 years. “And that’s, as far as I’m concerned, all the taxes they’re going to get.”

Editor’s Note: See the full Newsmax interview with Orrin Hatch, and excerpts:

© 2013 Newsmax. All rights reserved.

By Todd Beamon and Kathleen Walter

Sen. Hatch: ‘I’m Counting’ on House to Pass Immigration Reform.


Image: Sen. Hatch: 'I'm Counting' on House to Pass Immigration Reform

By Greg Richter

Immigration legislation is not dead, Sen. Orrin Hatch, R-Utah, said Sunday on ABC’sThis Week.”

“I do think our House members are going to take this as a very serious challenge,” Hatch said. “And, frankly, I’m counting on them.”

The Senate’s comprehensive immigration bill passed in late June isn’t perfect, Hatch said. “There are a lot of things that need to be perfected.”

The House is working on separate bills that deal with various aspects of immigration, but Hatch said he believes a conference committee can craft a final bill “that will solve this festering sore that exists in our country today.”

Eleven million people are living in the United States illegally, and the Senate bill provides a “pathway to citizenship” for those wanting it.

“Most of them are pretty good people,” Hatch said, “and they’d like to be Americans, or, at least they’d like a job here.”
© 2013 Newsmax. All rights reserved.

Hatch: Use Insurance Companies to End US Pension Crisis.


Image: Hatch: Use Insurance Companies to End US Pension Crisis

A powerful U.S. senator would like to use life insurance companies to help alleviate the funding crisis that has engulfed many public pensions.

Utah‘s Senator Orrin Hatch, the top-ranking Republican on the Finance Committee, will introduce legislation on Tuesday that would create a new public retirement plan in which insurance companies pay benefits through annuity contracts.

According to a summary of the bill provided to Reuters, an employer would pay a premium each year to a state-licensed insurer. Employees would then receive fixed income annuity contracts from the insurance company, “thereby building an annuitized pension year-by-year during their working lives” and making pension plan underfunding “not possible.”

Annuities function similarly to defined-benefit plans by paying set amounts in regular installments. The accumulation of annuity contracts would even out interest rate fluctuations, according to Hatch, who would also have life insurance companies competitively bid for them.

There is no official figure for how badly public pension plans are underfunded. Pew Center on the States estimates they are short more than $850 billion in total for future retirees’ benefits.

For years, states short-changed their retirement systems. When state and local revenues plunged during the 2007-09 recession, they cut contributions further. At the same time the financial crisis ravaged the earnings on retirement systems’ investments, which provide more than half of all pension funding.

Pension plan finances have improved in 2013, with states making greater contributions just as the stock market pushed pension assets to record levels. In 2012, pensions in aggregate had enough assets to cover 73 percent of their liabilities.

Still, worries about underfunding persist, primarily because the public workforce is maturing. Meanwhile, some pension reforms face political and legal resistance.

For at least three years, Hatch has sought a uniform solution to the public pension crisis. Like his Republican colleagues, he is concerned the federal government might have to intervene if the problem worsens. Others, including the International Monetary Fund, have said growth in pension spending could drag down the U.S. economy.

Hatch’s legislation would also put employees at small or start-up companies into annuities for retirement, as well as change the federal oversight of 401(k) retirement plans offered by most corporations and of Individual Retirement Accounts.

© 2013 Thomson/Reuters. All rights reserved.

Source: NEWSmax.com

Hatch: ‘Hard to Believe’ Obama Unaware of IRS Targeting.


Image: Hatch: 'Hard to Believe' Obama Unaware of IRS Targeting

By Todd Beamon

Sen. Orrin Hatch of Utah told Newsmax on Friday that “there’s not much doubt” that the targeting of tea party and conservative groups by the IRS “reached high levels in the Obama administration.”

“They claim the president didn’t know anything about it,” Hatch told Newsmax in an exclusive interview. “It’s hard to believe, since people in the White House did. It’s pretty difficult to believe.

“It’s a serious set of problems. It never should have happened,” said Hatch, the ranking GOP member on the Senate Finance Committee, which oversees the IRS. “But that’s what happens when you have partisans running the bureaucracy — and in this particular case, it’s pretty apparent that these are partisan Democrats.

“Well, most of the bureaucracy are Democrats,” Hatch added with a chuckle, “so the question is, Can we keep them from being partisan?”

The scandal engulfing the Internal Revenue Service broadened on Friday amid news reports that the agency not only singled out groups with such words as “tea party” or “patriot” in their names for additional evaluation — but that it also investigated activists connected to such organizations.

Information on the expanded scrutiny is expected to be revealed during a hearing of the House Ways and Means Committee on Tuesday, McClatchy reports.

“It’s very surprising because the IRS is really one of the most chilling organizations in government,” Hatch told Newsmax. “Everybody’s afraid of the IRS, afraid of being unjustly accused of something.

“It’s a chilling experience to have the IRS taking sides in anything. The IRS is supposed to be totally above any kind of politics.

“Unfortunately, it looks to us as though not only have they not been above politics, they’ve done some things that really are suspect and are just plain wrong — and probably illegal — but we’ve got to get all the facts before we can draw all of those conclusions,” Hatch said.

The senior senator said that the IRS failed to respond on Friday to a six-page letter from the Finance Committee seeking specific information on the targeting scandal. He said he wanted to see how the committee’s investigation concluded before calling for a special prosecutor.

“It’s bothering me, because you want your administration — whether it’s Republican or Democrat — you want it to be above politics,” he told Newsmax. “You want it to be above unethical conduct. You certainly want it to be above illegal conduct.”

Hatch noted how Lois Lerner last week invoked her Fifth Amendment right to avoid self-incrimination when she refused to testify before the House Oversight and Government Reform Committee, which is investigating the scandal.

Lerner, who oversaw the division linked to the targeting, has since been replaced and put on administrative leave with pay.

“She had every right to do so,” Hatch said, referring to Lerner’s taking the fifth. “But it raises questions in anybody’s mind: Are there things being covered up here? As far as I can see, it looks like there very may well be.”

© 2013 Newsmax. All rights reserved.

High-Tech Industry Big Winner in Senate Immigration Bill.


More than any other group, the high-tech industry got big wins in an immigration bill approved by the Senate Judiciary Committee last week, thanks to a concerted lobbying effort, an ideally positioned Senate ally and relatively weak opposition.

The result amounted to a bonanza for the industry: unlimited green cards for foreigners with certain advanced U.S. degrees and a huge increase in visas for highly skilled foreign workers.

Thanks to the intervention of Republican Sen. Orrin Hatch of Utah, the industry succeeded in greatly curtailing controls sought by Democratic Sen. Dick Durbin of Illinois aimed at protecting U.S. workers.

In exchange, Hatch voted for the bill when it passed the committee, helping boost its bipartisan momentum as it heads to the Senate floor next month. For Durbin and his allies in organized labor, winning Hatch’s support was a bitter victory.

“There was an agreement with the tech industry and Sen. Hatch said he wanted more, and that was what it took to get his vote,” Durbin said in an interview.

The tech industry “really used Senator Hatch’s vote to improve their position in the bill. I understand that,” Durbin said. “But I think in fairness now, I hope the industry is satisfied and they will not push this any further.”

Hatch countered: “Look, these are companies looking to contribute to the American economy in a way that benefits American workers and American-trained foreign workers.”

Even before the Judiciary Committee took up the bill, industry had seen key pieces of its wish list granted. The legislation written by four Democratic and four Republican senators awards a permanent resident green card to any foreigner with a job offer in the United States and an advanced degree in science, technology, engineering or math from a U.S. school. It also raised the limit on the H-1B visas that go to highly skilled immigrants from 65,000 a year to as many as 180,000.

But the increase in H-1B visas was accompanied by new requirements aimed at ensuring American workers get the first shot at jobs. High-tech industry leaders say they never agreed to those provisions; Durbin insists they did.

Once the bill language became public last month and tech industry officials began absorbing the details, they turned their attention to the next front in the battle: the Senate Judiciary Committee.

They found their champion in Hatch, whose state is an increasingly significant high-tech employer. Fortuitously, he had maximum leverage. Viewed as the one Republican swing vote on the committee, he was courted by the senators who wrote it, Durbin and Democratic Sen. Chuck Schumer of New York among them.

Even as the tech industry remained largely supportive of the legislation in public, its lobbyists began working behind the scenes with Hatch’s office on a series of amendments he would introduce in the committee to undo key provisions Durbin had pressed for.

The industry objected to using the unemployment rate in determining how much the number of H-1B visas could increase. One Hatch amendment would have taken the joblesss rate out of the equation.

A provision that required tech companies to offer a job to an equally qualified U.S. citizen over an H-1B holder was seen as unworkable by industry. Hatch sought to limit that requirement to companies most dependent on H-1B visas, thereby excluding many major U.S. companies.

The bill sought to bar companies from displacing a U.S. worker within 90 days of filing an application for an H-1B visa. Hatch alao sought to limit that requirement to heavy H-1B hirers.

Durbin objected to the changes. Unions, which had been largely quiet on high-tech issues while focusing on other priorities including a pathway to citizenship and a separate visa program allowing lower-skilled workers into the U.S., also spoke up in opposition.

But the AFL-CIO‘s opposition never was seen as a serious concern by senators or aides involved. They were confident that labor would not pull its support for a bill offering citizenship to millions over a provision affecting relatively few union workers.

Ana Avendano, assistant to the AFL-CIO president for immigration and community action, acknowledged that the union’s strong support for a path to citizenship hampered its leverage on other issues.

“We have not veered from our commitment to the path to citizenship. But we are equally committed to other parts of this bill, and it makes our fight for our priorities more difficult,” she said. “Tech was extremely fortunate that they found an ally on the committee that could open up a deal that had been sealed.”

There was little opposition from other fronts. The companies that are the heaviest H-1B users — and would therefore face the brunt of the restrictions under Hatch’s proposals — include technology companies based in India that have scant lobbying presence or constituency in Congress. An organization representing U.S. engineers and tech workers, IEEE-USA, has little clout compared with companies like Microsoft and Facebook.

As the Judiciary Committee began wading through amendments to the bill, Hatch was negotiating with Schumer over his amendments. Schumer wanted Hatch’s vote for the bill without alienating Durbin.

Last Tuesday morning, the committee’s final day working on the bill, word went out: There was a deal.

When the details emerged, Hatch had won much of what he wanted.

The unemployment rate would no longer be a factor in how high the H-1B visa cap could go up, as long as it was not 4.5 percent or above for the highly skilled professions in question. Only those companies most heavily dependent on H-1B visas would have to offer jobs to qualified U.S. citizens first, although the definition of an H-1B-dependent company was tweaked to make it slightly narrower. And the provision barring displacement of U.S. workers within 90 days was also limited in much the way Hatch sought.

The committee approved the changes, with Durbin voting “yes,” though only after making clear his discomfort with the outcome.

The AFL-CIO refused to sign off on the deal, but remained supportive of the overall bill.

The tech industry pledged its support for the bill, and promised not to seek additional changes, according to Scott Corley, executive director of Compete America, which represents high-tech companies including Google, Intel and Microsoft.

In the aftermath, Durbin and labor officials accused the tech industry of taking advantage of Hatch’s position on the committee in order to reopen a done deal, to the detriment of U.S. workers. But Corley insisted that the tech industry never had agreed to the restrictions in the original bill and was only trying to ensure the H-1B program would be workable for an industry that’s good for American workers and the U.S. economy.
© Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Source: NEWSmax.com

Hatch, Democrats Reach Deal on High-Tech Visas.


Sen. Orrin Hatch reached an agreement with Democrats on changes to a high-skilled visa program, clearing an impediment to Republican support for legislation revising U.S. immigration law.

“There were several things that he proposed that were absolutely unacceptable; we tried to find those things that were acceptable and to build upon them, and I think we’ve reached a reasonable compromise,” said Illinois Sen. Richard Durbin, the chamber’s second-ranking Democrat and a co-author of the immigration proposal.

The Judiciary Committee, in its fifth day of considering amendments, is expected to finish work on the immigration bill late Tuesday, Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters.

The agreement with Hatch would change the formula for calculating the number of visas for foreign technology workers while keeping the bill’s limit of 180,000 a year. It would lift a requirement that companies look for a U.S. worker before hiring a foreign visa holder for all companies except those whose workforce is more than 15 percent foreign.

“If a firm has more than 15 percent foreign employees, there are going to be more rigorous standards in terms of recruitment and making these jobs available to Americans,” said Durbin. He pushed for protections for U.S. workers to be included in the original Senate plan.

Citizenship Path

The Senate bill seeks to balance a path to citizenship for 11 million undocumented immigrants in the United States, sought by Democrats, with enough border security improvements to satisfy Republicans. It was written by a group of four Republican and four Democratic senators.

Durbin, Democratic Sen. Charles Schumer of New York, and other authors of the Senate immigration bill have been courting Hatch’s vote. The Utah Republican had said he would oppose the measure unless Democrats agree to his amendments favoring technology companies that seek to hire more high-skilled foreign workers.

The agreement reached today includes Hatch’s proposal to require employers to show that a U.S. worker wasn’t available only when they initially hire a foreign employee, not with each visa extension.

“I haven’t seen the final version, but if it’s done the way I want it to be done, yeah, then it would help me support the bill out of committee,” Hatch said today.

Technology Companies

Unions led by the AFL-CIO labor federation said technology companies are trying to undermine job security and opportunities for U.S. workers.

“We do not expect their endorsement of this, but we at least have worked with them and respected their input and have tried to reach an agreement that is close to the values they bring to the table,” Durbin said, referring to labor organizations.

The Judiciary Committee has adopted about 100 amendments. Reid has said he wants to bring the measure to the full Senate “as soon as it’s ready,” probably in early June.

Senate Republican Leader Mitch McConnell of Kentucky told reporters today he was “hopeful” the Senate could pass immigration legislation, adding that Republican senators share “a view the status quo is not good.”

McConnell said he would vote to bring the bill to the floor so it could be opened up for amendments.

H-1B Visa

The Senate bill would initially raise the annual H-1B visa limit for high-skilled foreign workers to 135,000 from 85,000. Caps in future years could increase to 180,000, depending on economic conditions.

The bill also would require companies to recruit U.S. workers before hiring foreign ones. Technology companies say that invites bureaucratic scrutiny by the government and lawsuits from U.S. workers.

While Hatch may support the bill in the Judiciary Committee, he has made clear it will take more than a deal on high-skilled visas to win his backing when the measure is considered by the full Senate.

For his vote, then, Hatch said lawmakers must agree to his proposed changes regarding the taxes immigrants must pay and social benefits they receive.

“They’re going to have to resolve those conflicts for me, or I will have to vote against the bill on the floor,” Hatch said.

Additional Taxes

Hatch said he wants to require immigrants who seek citizenship to pay additional taxes and to make clear that unauthorized employment can’t count toward eligibility for Social Security benefits. He is proposing a five-year waiting period before those on the path to citizenship could receive subsidies under the 2010 healthcare law.

The proposals would improve the bill’s prospects for gaining the 60 votes needed in the Senate and also for passing the Republican-controlled House, Hatch said.

“If they do some of the things I think ought to be done, then I think it’s got a chance,” he said.

Durbin said the agreement reached today doesn’t include Hatch’s additional requests, though he said talks would continue.

“He’s bargaining for as many things as he can get,” Durbin said, referring to Hatch.

 

© Copyright 2013 Bloomberg News. All rights reserved.
Source: NEWSmax.com.

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