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House
Approves Pension Rule Changes By Susan Cornwell
Washington - The U.S. House of Representatives on Wednesday approved changes in pension laws that sponsors said would provide workers advice on investing their retirement assets, and give them more control over them. Critics poured scorn
on the bill, saying it was a sop to Wall Street firms penalized recently for
conflicts of interest involving stock analysts because it would allow
similar conflicts in the management of retirement funds. The House voted
271-157 to pass the measure, which is backed by the White House. But its
fate is uncertain in the Senate, which is more closely divided on party
lines and where the Finance Committee has yet to take up pension
legislation. Supporters said the
House action was an overdue response to the debacle faced by workers at
companies such as Enron Corp. , where employees lost over $1 billion in
retirement assets, much of it company stock, as Enron cratered in 2001. Rep. John Boehner,
Ohio Republican and sponsor, said the provision allowing companies to offer
employees professional advice about their retirement investments was badly
needed by some 60 million Americans with 401(k) plans. Right now, "the
only place they can get investment advice is from Bob at the coffee
shop," Boehner said. But critics, most of
them Democrats, blasted the bill for allowing the advice to come from the
same firms that are providing the mutual funds for the 401(k) plans, so long
as this is disclosed to employees. Rep. George Miller, a
California Democrat, said this opened up retirement funds to the same
potential conflicts of interest revealed in the Wall Street scandal, in
which companies used research analysts to pump up investment banking
business. "That
(investment) advice is going to come from the very same people that just had
an out-of-court settlement of $1.4 billion because they lied to their
clients," Miller declared. The bill would also
give companies the option of allowing workers who have been with the company
at least three years to sell company stock in their 401(k) plans. Enron
required its workers to hold the company stock it received in matching
company contributions until they were at least 50 years old. But critics said that
because the provision is discretionary, employers would still not be forced
to let workers sell the stock. "Enron wouldn't have allowed it, so
nothing would have changed" even if the bill had been law, said Rep.
Robert Matsui, Democrat of California. The House passed the
same bill a year ago, but the issue stalled in the Senate, where Democrats
said the measure wasn't robust enough, but failed to push through their own
version. SPECTER OF SPITZER House Democrats quoted
New York Attorney General Eliot Spitzer, who spearheaded the Wall Street
analyst probe, as saying the bill would create a "loophole"
putting Wall Street's interests ahead of those of working Americans. But sponsors and the
Bush administration rejected this argument. "I think it's a little bit
of a red herring," said Ann Combs, assistant secretary for the employee
benefits security administration in the Department of Labor. The pension bill
includes protections to make clear that the firm giving the investment
advice is a "fiduciary" who is legally responsible for the advice
to workers, Combs said. "Spitzer tried to
impose a settlement where there were no rules. This bill has rules,"
Combs told Reuters. The House rejected a
Democrat-sponsored amendment aimed at preventing abuses of executive
compensation and protecting older workers when companies convert traditional
pension plans to "cash balance" plans, which cut costs for
employers. Boehner said it was important for Congress not to overreach and discourage companies from offering pension plans. Copyright ©
2002 Global Action on Aging
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