Bush, responding to growing Enron flap, readies pension overhaul plans
Friday, February 1st 2002, 12:00 am
News On 6
WASHINGTON (AP) _ President Bush will ask Congress to revamp pension laws to give workers greater flexibility to diversify their company savings accounts, a response to the Enron Corp. bankruptcy that cost workers their life's savings and created a political problem for the White House.
The Bush proposal also would require companies to provide workers more frequent reports about their 401(k) plans and increase employer accountability when workers are barred from trading on the savings accounts.
``About 42 million American workers own 401(k) accounts with a total of $2 trillion in assets,'' an outline of the plan provided by White House officials said. ``These workers need to have full confidence in the security of their pension plans.''
However, Bush's proposal would not limit the portion of workers' 401(k) plan that could be invested in their employer's stock, as many in Congress want.
``The control feature of the president's plan would ensure that no executives would be able to sell their stock if other workers in the company were not allowed to sell theirs,'' Labor Secretary Elaine Chao said Friday on CBS' ``The Early Show.''
Bush, long associated with Enron, was announcing the initiative Friday in a meeting with lawmakers, said the officials, who spoke on condition of anonymity.
Enron's bankruptcy is the subject of criminal and congressional investigations, in part because workers said they did not know the extent of the company's financial problems and were unable for a few weeks to remove their savings from Enron's 401(k) program.
Company stocks plunged after the bankruptcy, virtually wiping out workers' 401(k) savings and costing investors untold millions.
Bush's proposal came from a Cabinet-level task force he formed on Jan. 10, the day the White House disclosed that two members of Bush's Cabinet received pleas from former Enron Chairman Kenneth Lay shortly before the company's collapse.
The disclosure raised questions about whether Enron received special treatment because of its deep ties to the Bush administration. Bush says Enron gained nothing from its association with him and administration officials.
Lay is a longtime friend and supporter of the president, and several administration officials had financial ties to Texas-based Enron. Company officials met with Dick Cheney and his aides several times as the vice president drafted Bush's energy plan.
In addition, Lay recommended appointments to a federal energy commission to the White House last spring. Bush eventually appointed two of the people on Enron's list.
Congressional hearings resume Monday, with Lay due to testify.
Bush has said he was outraged that Enron investors were not told more, and he said his mother-in-law lost more than $8,000 from investing in company stocks. He formed a Task Force on Retirement Security to review pension laws and determine how companies could be required to disclose more financial information, moves widely viewed as attempts to ease political backlash.
Officials said Bush will announce Friday that he has accepted the task force's findings, including plans to:
_Give workers the right to sell company stocks and diversify into other investment options after they have participated in a 401(k) plan for three years. Some companies allow workers to diversify quickly, but others impose holding periods that can last decades.
_Forbid senior corporate executives from selling company stock during periods when workers are unable to trade on their plans. These ``blackout periods'' occur when employers change pension plan features or administrators. Last year, Enron executives cashed in millions of dollars in stock while telling workers the company was doing fine.
_Make companies more liable during blackout periods. Under current law, when 401(k) plans are controlled by workers, employers are not responsible for the result of workers' investment choices. This ``safe harbor'' from liability would no longer apply during a blackout period. Employers would be responsible for what happens to worker investments if the company should fail to act in the interest of the workers when they created the blackout period.
_Require companies to give 30-days' notice before a blackout period begins.
_Require companies to give workers quarterly benefit statements that include information about accounts, including the value of their assets, their rights to diversify and the importance of maintaining a diverse portfolio. Under current law, the reports are due annually.