Corzine and Boxer to Co-sponsor Pension Protection Legislation Authored by Senator Kennedy

Senators Jon Corzine (D-NJ) and Barbara Boxer (D-CA) have decided to drop their pension reform bill that would limit workers to holding no more than 20 percent of their 401k plans in any one stock. Instead, they will endorse a bill sponsored by Democratic Senator Edward M. Kennedy.

According to Senator Boxer's office, Senator Kennedy's bill incorporates the two main goals set forth in the Boxer-Corzine bill - diversification and divestment.

First, the bill includes a unique way to reach diversification. If a company does not have a strong traditional pension plan, investment in company stock can be made by the employer matching contribution or employee investment - but not both. According to Boxer's office, the bill also requires employees to receive a warning that their accounts may be over invested in employer stock if more than 20% of their individual 401k holdings are invested in employer stock.

Second, the bill incorporates the idea in the Boxer-Corzine bill that employees have the right to divest company stock without onerous restrictions and within a reasonable amount of time.

"I look forward to working with Senator Kennedy to see that this compromise bill is passed as quickly as possible," said Senator Boxer. "The retirement security of American workers is at stake."

In a statement issued by Senator Kennedy's office, "The legislation we are introducing today, the Protecting America's Pension Act, offers workers real investment choices plus protection for their retirement savings. Employers can no longer have it both ways when its comes to pushing their stock in 401k plans -- they can't both match in stock and pressure workers to buy company stock as an investment option."

Fact Sheet On The "Protecting America's Pensions Act of 2002"
Supplied by Senator Boxer's Office

• Allow worker choice by prohibiting age restrictions that prevent workers from selling company stock. Limit to three years (the usual time for vesting) the time a worker could be required to hold company stock.

• Protect worker retirement savings by limiting company stock to either the employer matching contribution or employee investment of their own contribution -- but not both. This limitation would not apply if employers provided a substantive defined benefit (traditional) pension plan in addition to a 401k plan.

• Require that all plan participants receive at least 30-day written notice before any administrative "lockdown."

• Clarify that it is a violation of ERISA for an employer to give misleading information or to fail to provide material information regarding the company stock.

• Amend ERISA to allow the plan and participants to seek remedies from executives who mislead or harm workers' retirement security.

• Require disclosure to workers of sales of company stock by executives to alert workers to the decisions of those with the best information about the company.

• Require all plans to offer education on the benefits of diversification and the risks of holding employer stock.

• Require that workers and other plan participants be represented on the retirement plan board of trustees.

• Require 401k plans to permit workers to vote the company stock held in their accounts.

• Require the Department of Labor to establish an office of Participant Advocate to monitor abuses of employee pension rights and assist plan participants and beneficiaries in obtaining benefits and resolving disputes.

• Provide workers with access to unbiased investment advice by including the Bingaman-Collins Independent Investment Advice Act.

• Require 401k plans to provide quarterly benefit statements that will include information on the benefits of diversification, the risks of holding employer stock, and the percentage of retirement assets held in employer stock.

• Require defined contribution plans to maintain sufficient insurance, as determined by the Department of Labor, to protect workers in the case of violations of their rights. Direct the Pension Benefit Guaranty Corporation to conduct a study of the feasibility of insuring defined contribution plans.

• Amend ERISA to insure that plan participants, as well as the plan itself, can seek remedies for breaches of fiduciary duty, as in the case of Enron.

Rick Meigs, Publisher, 401khelpcenter.com, LLC