Workers could receive financial advice from the same companies that manage their 401(k) accounts under Enron-inspired legislation that the House of Representatives passed Wednesday for a second time.
The bill, approved 271-157, is supported by the White House and contains principles outlined by President Bush in his February 2002 pension proposal.
“Our goal here is to get real investment advice into the hands of everyday working people,” said Rep. John Boehner (R-Ohio), chairman of the Education and Workforce Committee and sponsor of the bill. “The only place they can get investment advice is from Bob at the coffee shop.”
The House also passed the bill last year, but it died when the session ended. The Senate has no plans to take up the new bill anytime soon.
House Democrats said such advice would be tainted by financial conflicts of interest because advisers could recommend funds that pay them fees.
“Does this make sense when many of the biggest investment houses in the nation … have just paid out nearly a billion-and-a-half dollars for committing just these kinds of abuses?” asked Rep. George Miller (D-Calif.).
Business groups heavily lobbied Congress in the wake of corporate scandals at Enron Corp. and other companies, cautioning against drastic and hasty changes to retirement and investment plans.
As a result, 1 1/2 years after thousands of Enron workers lost their retirement savings in the company’s collapse, Congress has yet to enact a law that would protect 401(k) account-holders from similar failures.
In the House, Republicans and Democrats agree that workers need access to professional investment advice to help them diversify their 401(k) accounts. Enron workers who lost their life savings in their 401(k) plans were heavily invested in company stock.
But just how to provide the advice is the focus of debate.
Republicans say workers should be allowed to receive advice from some of the largest and best investment houses in the country. Conflicts of interest would be avoided because the bill holds personally liable any advisers that breach their legal obligations, Republicans say.
The securities and investments industry is a big campaign donor, giving almost $60 million in the 2002 elections–52 percent of it to the GOP, according to the Center for Responsive Politics.
The industry is Boehner’s fifth-largest donor, contributing $29,500 to him last year.
His bill requires advice providers to disclose in plain language any fees or potential conflicts. Employers that do not provide the advice are shielded from lawsuits resulting from such guidance. The bill also lets workers purchase their own investment advice with pretax dollars.
For employers that match workers’ 401(k) contributions with company stock, the bill would give companies the option of letting workers sell that stock after three years of receiving it in their accounts or after three years of service with the company. Enron workers were required to hold the stock until age 50.
But critics said that because the provision is discretionary, employers would 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 (D-Calif.).
Democrats offered their own pension proposal but did not have the votes to pass it. They also were unable to kill Boehner’s bill by sending it back to committee.
Their plan would have required executive pensions and stock options to be subject to the same rules that apply to their workers’ plans.
