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Legislation Introduced in U.S. Senate and House

"Produce meaningful pension reform"that is the plea IBEW members have delivered to the U.S. Congress in the months since Enrons collapse wiped out some 12,000 workers 401(k) retirement savings and damaged countless thousands of others.

A flurry of legislation on 401(k) pension reform intended to protect workers from the fallout of another Enron-like fiasco is now emerging on Capitol Hill.

The various bills differ significantly in their approach. Major differences include varying provisions for: 1) worker representation in management of 401(k) plans, 2) requirements for independent investment advice and disclosure, and 3) requirements for diversification of employees 401(k) stock holdings. These bills are pending before Congress, and nothing has yet been enacted.

With Enrons bankruptcy, IBEW Local 125 members employed by Enron subsidiary Portland General Electric in Oregon lost millions in 401(k) savings. PGE workers received company stock as a matching contribution to their 401(k) accounts and they were prohibited from selling that stock until age 50.

Workers were lied to about the true financial condition of the company and while Enron stock nose-dived, employees were locked out of their 401(k) accounts. IBEW members have testified before Congress four times to convey this devastation and to urge reforms.

In the Senate, a bill (S. 1992) sponsored by Sen. Edward M. Kennedy (D-Mass.) was approved by committee on March 21.

It includes important worker protections not included in the House of Representatives bills.

The Kennedy bill, S. 1992, requires that workers have a real voice in how their 401(k) retirement plans are run; encourages employers to offer fully independent investment advice to workers; and limits concentration of investment in company stock unless a sufficient defined benefit pension plan is offered. The Kennedy bill also gives workers a right to know when executives are selling their stock and requires companies to provide a 30-day notice of any pending 401(k) "lock-down."

S. 1992 allows workers to elect their own representatives to serve on the boards of trustees that govern how 401(k) and other defined contribution plans are run. The bill gives workers the right to appoint representatives to the board of trustees.

A measure (H.R. 3762) in the Republican-controlled House is sponsored by committee Chairman Rep. John A. Boehner (R-Ohio) and reflects the Bush Administrations proposal.

The Boehner bill does not provide workers a real voice in how their 401(k) plans are run. It lacks a requirement for fully independent, unbiased investment advice, lets companies force workers to remain invested in company stock for long periods of time and threatens current worker protections.

The Boehner-Bush Administration proposal creates a dangerous exemption from current law. Currently, insurance companies, mutual funds and other financial service companies that provide the menu of funds available for investment are banned from advising workers on their 401(k) investment options. The Boehner bill would create a special exemption from ERISA to allow such providers to provide conflicted investment advice.

A third bill (H.R. 3669), sponsored by Reps. Rob Portman (R-Ohio) and Benjamin L. Cardin (R-Maryland), includes a stipulation that employees could use a portion of their salary through payroll deduction, tax-free, to purchase investment advice.

Given the inherent risk to workers in the recent trend away from traditional "defined benefit" retirement plansand toward "defined contribution" plans such as 401(k)spension reform legislation to help ensure workers retirement security is paramount. The defined benefit pension plan fully protects workers and provides an exact formula on what their benefits are.

Any 401(k) pension reform bill that passes Congress should:

• Give workers a real voice in the management of their plans
    
• Provide employee-investors with independent, unbiased investment advice
    
• Provide at least 30-day advance notice of any lock-down
    
• Require disclosure of "insider sales" of company stock
    
• Encourage diversification to protect workers from accumulating dangerously high amounts of the employers stock

For more on the testimony of IBEW members on Capitol Hill and the call for pension reform, see right column.

IBEW Members Tell Senate Enrons Collapse Wiped Out Their Savings While Company Brass Profited

IBEW Provides Key Testimony at Enron Hearings on Capitol Hill - 2/22/02.

IBEW to Congress: Protect Workers From Enrons Abuse of Retirement Savings - 2/5/02.

IBEW Workers Testify Enrons Downfall Cost Them Savings - 12/18/01.