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April 23, 2002
An Unlikely Opponent of Some 401(K) Reforms
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When Congress considered several bills offering in the wake of the Enron collapse, top labor leaders quietly refused to support the most stringent proposal - one that would have taken an important first step toward affording 401(k) accounts the same protections that have long applied to traditional pensions.
Officials with the nation's largest labor group, the 13-million member AFL-CIO, insisted in interviews with the Times that their opposition to a so-called company stock cap was largely tactical. They said they feared the measure would galvanize corporate opposition against any reform.
But the officials conceded they also were influenced by internal polls showing that union members are deeply enamored of their 401(k)s - often to a greater extent than they are of their financially more important and far less risky union-won pensions.
"Our people just value their ability to make their own personal decisions. They trust their own investment decisions more than they do anybody else's," said Jerry Shea, chief policy advisor to AFL-CIO President John J. Sweeney.
The Times notes that worker infatuation with 401(k)s - and organized labor's opposition to strict limits on how they can be invested - illustrate how extensively the investor culture of the 1990s penetrated the nation.
Continued enthusiasm for individual retirement accounts even after two years of stock declines suggests how powerfully the idea of hitting it rich in the markets still grips America.
Many retirement-policy experts tell the Times that they fear the combination of these forces could prove fatal to any kind of thorough-going reform.
"There's a fundamental disconnect between people's fondness for 401(k)s as a personal investment vehicle and the fact that they are, first and foremost, key elements of our nation's retirement system," said J. Mark Iwry, who as the Treasury Department's tax benefits counsel from 1995 to 2000 was one of the nation's top retirement plan regulators.
"The 401(k) would not exist without the generous tax advantages provided by law. Those advantages are designed to ensure Americans have adequate and secure income to live on when they retire.
"It makes no sense to provide tax breaks, then do nothing to protect the accounts from the kind of imprudent investment that occurred at Enron," Iwry said.
To view the Los Angeles Times article, click here.
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