Associated Press
WASHINGTON — Workers with 401(k) retirement plans would get 30 days notice before their accounts could be frozen, and could more easily sell company stock under pension law changes proposed by President Bush to prevent another Enron-style fiasco.
Enron Corp., which was the country’s seventh-largest company just a few months ago, collapsed in bankruptcy in December, depleting the nest eggs of thousands of employees heavily invested in company stock. The plan had 20,795 participants.
Bush urged Congress to take up his plan as quickly as possible. "This is a matter of fairness," he said Friday. "It’s a matter of openness."
Pension reform is gaining momentum in part because Enron workers say they did not know the extent of the company’s financial problems and were prevented for a several weeks from removing their savings from the company’s 401(k) plan.
The popularity of such plans has exploded. About 42 million Americans hold accounts with a total of $2 trillion in assets. Just 3 percent of retirement plans were 401(k)s in 1984. By 1998, that had grown to 41 percent.
Under Bush’s plan, workers who participate in a 401(k) plan for three years could sell company stock and diversify their holdings. Many companies now make matching contributions to workers in the form of company stock, and some require the stock to be held for decades.
Many in Congress want to limit the portion of 401(k) assets a worker can have in company stock, and proposals range from 10 percent to 20 percent. Enron’s 401(k) plan had about 63 percent of its assets in company stock, which has dropped to less than a dollar a share from a high of nearly $90 last year.
Traditional pension plans by law are prohibited from investing more than 10 percent of assets in employer stock. But Congress freed 401(k)-style plans from that regulation to encourage companies to offer them.
One consumer advocate group said Bush’s proposals do not go far enough to protect workers.
"It’s an easy way for the administration to say they’re doing something without doing a whole lot," said Karen Friedman, director of policy strategies for the Pension Rights Center. "What we want is real diversification in 401(k) plans."
But opponents say companies do not have to offer such plans or make matching contributions, and too much regulation could discourage them.
"We want to encourage employers to continue to make generous matching contributions," said Ann Combs, the Labor Department’s assistant secretary for pension and welfare benefits. The Labor Department administers the law governing pensions.
Bush’s plan also would ban senior company executives from selling their corporate stock holdings when workers’ 401(k) accounts are frozen. Last year, Enron executives cashed in millions of dollars in stock while telling workers the company was doing fine.
"If it’s OK for the sailor, it ought to be OK for the captain," Bush said.
Enron employees complained that their retirement plans diminished as the company’s stock plummeted. Their accounts were frozen for several weeks in October and November while Enron changed plan administrators.
Such suspension periods commonly occur when companies make changes to retirement plans, such as switching administrators, installing new software or upgrading benefits.
William Duff, a lawyer specializing in employee benefits and employment law, praised the effort toward equity. "If employees can’t move shares during a blackout period, then executives won’t be able to either," he said.
Copyright ©2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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