Thursday, February 07, 2002
Chao: Keep 401(k) choices
She urges Congress to go easy
By Derrick DePledge
Enquirer Washington Bureau
WASHINGTON Labor Secretary Elaine Chao urged Congress on Wednesday to protect worker retirement plans but to avoid new government restrictions that might discourage companies from offering savings incentives.
President Bush has proposed safeguards for retirement plans in the aftermath of the Enron collapse that would give workers more control over company stock in 401(k) plans after three years and greater access to expert investment advice.
But some lawmakers want to set limits on the amount of company stock workers can keep in retirement plans so workers are not exposed if a company goes bankrupt. Ms. Chao said such limits might convince some companies not to offer stock or hamper workers from earning wealth if a company stock soars.
We believe it is their right to choose how to make their investment decisions, Ms. Chao told the House Education and the Workforce Committee at a hearing on retirement savings issues.
Many Enron workers lost their retirement savings because of heavy investment in company stock in their 401(k) plans. Some workers also complained they were unable to sell their stock last fall as Enron was failing because stock sales had been suspended while the 401(k) plan changed administrators.
Enron, like many companies, matched worker investments in its 401(k) plan with company stock but required workers to hold that matching stock until they reached 50.
The Bush administration would allow workers to sell company-matching stock after three years. Companies also would have to notify workers 30 days before any period when stock sales were halted.
The administration endorsed a proposal from Rep. John Boehner, R-Ohio, that would encourage companies to bring in expert investment advisers for workers as long as the advisers disclosed any fees or conflicts of interest. The bill passed the House last year.
Mr. Boehner, of West Chester Township, is expected to introduce the president's suggestions in a House bill today.
Mr. Boehner said it is important that workers diversify their investments but that government restrictions on stock ownership could narrow financial opportunity. For example, some workers at Procter & Gamble and Kroger where retirement plans are heavy in company stock have done well in the market.
How can we, the government, deny people the right to make that choice themselves? he asked.
Rep. Rob Portman, R-Ohio, and Rep. Benjamin Cardin, D-Md., have proposed a bill very similar to the administration's plan. However, their bill would give workers tax incentives to help pay for investment advice.
Rep. George Miller, D-Calif., said the White House and Congress must address the retirement and accounting problems related to Enron.
We have a national crisis of confidence, he said.
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