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February 01, 2002
Bush Unveils 401(K) Plan
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Taking his first step to address the issues raised by the Enron collapse, President Bush on Friday proposed giving workers greater freedom to diversify their company retirement accounts.
Specifically, he called for letting workers sell company stock after three years if they wish to pursue other investment options, according to the Washington Post. That rule would apply even to shares contributed by companies as matching grants.
He also said companies should be encouraged to make outside financial advice available to employees.
Further, he proposed "pension parity," in which top executives would be forbidden from selling company stock during "blackout" periods, when lower-ranking workers may not trade such stock in their 401(k) plans.
The Post reports that the parity proposal is aimed at protecting workers from the dilemma of Enron employees, who watched the company's stock plummet last fall but were unable to switch to other investments, even as top executives cashed out.
"If it's OK for the sailor, it should be okay for the captain," Bush said in outlining his proposals to Republican members of Congress at their retreat in White Sulphur Springs, W. Va. He called it a "matter of fairness."
A senior official, speaking about the proposal before Bush's speech, told the Post, "All of these proposals would not necessarily have applied to Enron, but we believe this plan addresses the major pension-related problems the Enron situation highlighted."
Bush's proposals must be approved by Congress. Some of the ideas are largely symbolic: Employers would be required to give workers quarterly benefit statements that include information on individual accounts. Such statements are now required annually.
Pension experts told the Post that Bush's plan does little to address the larger issues of retirement security. It contains a loophole big enough to possibly allow "future Enrons," they said, in part because workers could lose the protections if an employer converted a 401(k) plan into an employee stock ownership plan.
David M. Certner, federal affairs director for AARP, said the plan "takes one small step but leaves the fundamental problem unaddressed," which is that employees' holdings are likely to remain concentrated in their employers' stock.
Enron's 401(k) plan had nearly 21,000 participants, and at the end of 2000 held $1.3 billion worth of Enron stock. That stock is now virtually worthless. In Enron's plan, the company matched a portion of each worker's contributions to the 401(k) in company stock, but it forbade workers from selling those shares until they reached age 50.
Enron also locked down its 401(k) plan for several weeks in late October to change plan administrators. The company has denied that this was anything more than an administrative matter, but the freeze occurred as Enron stock plunged, and the Labor Department is investigating whether the timing violated federal pension fiduciary requirements.
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