Sunday, April 21, 2002

Senate differs on 401(k) fix-ups

By Brian Tumulty
Gannett News Service

        WASHINGTON — The 401(k) pension legislation that passed the House 10 days ago may bear only a few similarities to the bill the Senate is expected to take up sometime after Memorial Day.

        The House-passed legislation largely mirrors the Bush administration's proposals for responding to 401(k) savings losses suffered by Enron employees who heavily invested in their company's stock.

        But the Senate bill the Health, Education, Labor and Pensions Committee approved last month has some significant differences business groups dislike and employee rights groups endorse.

        Among the Senate proposals: a requirement for “fiduciary insurance” against plan administrators' possible misdeeds and a proposal for employee representation on pension boards.

Some differences
               The House bill has provisions the Senate version doesn't, including a controversial one from U.S. Rep. John Boehner, R-West Chester, which would remove current conflict-of-interest barriers for a third-party plan administrator to offer advice to workers.

        Advocacy groups such as the AARP, formerly the American Association of Retired Persons, oppose the Boehner proposal because a financial services firm that also sponsors mutual funds would be able to steer workers to their own firm's funds over other 401(k) choices.

        The House legislation also increases the percentage of workers who can legally be excluded from the plan and relaxes nondiscrimination rules that guarantee benefits are not skewed to highly paid employees, according to the Pension Rights Center.

        Both the House legislation and the Senate committee bill require more frequent disclosure to employees of their account balances and more advance notice of so-called blackout periods when accounts are frozen.

        Current federal law requires employers to allow workers with matching stock contributions to sell that stock if they are age 55 or older and have 10 years of service.

Quicker sales
               Both the House and Senate bills would require 401(k) sponsors to allow all employees, regardless of age, to sell that stock after three years.

        Business trade organizations have given the House legislation their qualified support. Vincent Randazzo, director of public policy for the Business Roundtable, described it as “a measured and responsible approach to addressing the perceived shortcomings employees have in managing their 401(k) plans.”

        But pension experts have doubts that an Enron-type financial collapse caused by a dramatic fall in the price of the employer's stock could be averted through legislation.

        Only about 11 percent of the assets in the Enron 401(k) plan was Enron stock that originated with the employer match, according to Brian Graff, executive director of the American Society of Pension Actuaries.


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