In his testimony during the panel's hearing on employee and employer views on retirement security, Klein noted a number of currently introduced policy responses that Congress should pursue. "401k participants should have the information, education and professional advice they need to wisely exercise their investment responsibility. Workers should be provided with advance notice of transaction suspension periods as well as periodic notices that stress the importance of diversification. The Council likewise supports allowing employees to save for the cost of retirement planning services on a pre-tax basis through payroll deduction at the workplace. Further, we support enactment of legislation to help 401k participants get the professional investment advice they desire. This bill, which passed the House last fall, clarifies employer obligations and opens up the advice marketplace to a great number of competitors."

He added, "Congress should also streamline the rules that apply to defined benefit pensions so more companies can provide these employer-funded and federally insured benefits to their workers as an effective complement to a 401k program. Shortly we'll be seeing a positive step in that direction drafted by four members of the Ways and Means Committee, Representatives Rob Portman (R-OH), Sam Johnson (R-TX), and Earl Pomeroy (D-ND) and Ben Cardin (D-MD). They are preparing a bill to reform one of the most vexing problems facing sponsors of traditional pension plans - the inflated liabilities resulting from the abnormally low 30-year Treasury bond rate required for use in plan funding."

"From a high of 175,000 plans in 1983 to fewer than 50,000 today, the decline in our nation's defined benefit system offers a sobering lesson about the dangers of overreacting by over-regulating," said Klein. "For example, the Council is greatly concerned with the stringent proposals concerning transaction suspension periods - capping their length to arbitrary time periods and holding plan fiduciaries responsible for investment losses during these periods."

Transaction suspension periods typically accompany a change in 401k recordkeeper or the inclusion of an acquired firm's employees in a company's plan. They are a normal and necessary part of plan administration and the changes they facilitate are often done to improve the services or investment options offered to employees.

The Subcommittee was also urged by Klein to reject percentage caps on the amount of company stock that can be invested into individuals' 401k plan accounts. "Such caps would be highly unpopular and contrary to the best interests of the many employees who have an ownership stake in their company," he said. "Recent research estimates a 4- to 8-percent improvement in retirement investment plan returns could occur when company stock is included in a plan. Caps would also discourage employers from continuing to provide as generous 401k matching contributions given the greater expense of matching in cash than in stock."

Klein concluded by telling the Oversight Subcommittee that "one cannot hear of the experiences of Enron employees and not be determined to take steps to prevent such a situation from occurring in the future. At the same time, one cannot examine the realities of the 401k system without concluding that overly aggressive legislative change could unintentionally harm the very people that Congress hopes to protect. This Subcommittee understands the delicate balance of regulation and incentives upon which the success of our voluntary, employer-sponsored pension system depends. We ask that you keep this delicate balance at the center of your deliberations as you lead this Committee's response to the Enron bankruptcy."

Klein's written testimony is available on the Council Web site: http://www.americanbenefitscouncil.org/issues/retirement/02-02wmoverwrit.pdf