President Bush today proposed changes to 401(k) rules that would allow workers more control over their retirement plans. The proposal comes in the wake of the financial collapse of Enron, the energy trading company that had close ties to the Bush administration and is now under investigation by the Justice Department.
Enrons employees lost millions when the company declared bankruptcy, mainly because their retirement plans were weighted heavily with Enron stock and they were not allowed to immediately sell it.
To prevent that problem in the future, Bush said he would submit to Congress a bill that will allow workers to sell company-contributed stock after those workers have participated in retirement plans for three years. Current law says that companies can force their workers to hold company stock indefinitely.
In addition, the Bush plan would hold senior executives to the same restrictions that are applied to average workers during "blackout periods," or times when employers alter pension plans and block investors ability to alter their retirement accounts. Firms would also be "responsible for their workers inability to control their investments if they violated their duty to act in the interests of workers" during blackouts, the White House said.
Speaking at a lunch meeting of Republican lawmakers in West Virginia today, Bush said the proposal is intended to "strengthen the workers ability to manage their own retirement funds by giving them more freedom to diversify, better access to professional investment advice and quarterly information about their investments."
The proposed rule changes are the result of nearly a month of work by a team of top administration officials appointed by Bush in early January to review the issue. The team was led by Secretary of Labor Elaine Chao, Secretary of Treasury Paul ONeill and Secretary of Commerce Don Evans.
The proposals were applauded by Rep. John Boehner (R-Ohio), who successfully passed a bill in the House last year that would allow fund companies provide advice to retirement investors. The bill has been criticized by some lawmakers and those in the private sector who say fund companies could steer workers toward products that yield higher fees, which would constitute a conflict of interest.
But Bush has endorsed the bill and Boehner has used the recent attention to the issue to push hard for the advice acts approval in the Senate.
Other lawmakers, meanwhile, have proposed legislation that seeks to protect workers who invest in 401(k) plans. Representatives Peter Deutsch (D-Fla.) and Gene Green (D-Tex.) have introduced a bill in the House that would limit the amount of employer-issued stock workers could hold in their retirement plans to no more than 10%. And Senators Barbara Boxer (D-Calif.) and Jon Corzine (D-N.J.) have introduced a bill that would cap such retirement plan holdings at 20%.
Boxers office had no comment on Bushs proposals.