Bush to Unveil His Proposal for Pension Reform

Seeking to inoculate himself and other Republicans against political fallout from the Enron Corp. debacle, President Bush will soon ask Congress to broadly revamp pension laws, including enhancing the ability of workers to diversify their retirement accounts heavy with company stock, officials said Thursday.

The president will unveil his proposal today at a congressional Republican retreat in West Virginia.

Many key elements of Bush’s proposal, which was previewed for reporters Thursday by administration officials, seem designed to address problems arising out of the collapse of Enron, the Houston-based energy trading company that filed for bankruptcy Dec. 2, leaving many of its workers holding near-worthless retirement accounts.

For instance, Bush will propose “pension parity,” which would bar senior executives from selling company stock if rank-and-file employees may not trade such stock in their 401(k) plans, tax-deferred retirement savings programs. Such “blackout” periods often are imposed when employers change pension plan features or administrators.

As Enron stock collapsed last autumn, employees were prohibited from selling their shares held in the 401(k) plan because it was changing administrators. Top executives, however, were able to sell off shares of common stock they had received as part of their compensation packages.

Bush’s proposal also would require companies to give 30 days’ notice before any “blackout” period begins and make them more liable during such periods.

Current law exempts employers from liability in workers’ investment choices when 401(k) plans are controlled by workers. That “safe harbor” provision would no longer apply during a blackout period. Under Bush’s plan, employers would be responsible for what happens to workers’ investments if the company fails to act in the interest of the workers when it creates the blackout period.

In addition, the president’s plan also would allow workers to sell company stock after three years--including those shares contributed by companies as matching grants--and pursue other investment options, while companies would be encouraged to make independent financial advice available to employees.

Currently, many companies provide no 401(k) investment options besides company stock.

“About 42 million American workers own 401(k) accounts with a total of $2 trillion in assets,” according to a background paper prepared by the administration. “These workers need to have full confidence in the security of their pension plans.”

Bush’s plan would require companies to give workers quarterly benefit statements with information about their accounts, including the value of their assets, their rights to diversify and the importance of maintaining a diverse portfolio. Under current law, such reports are due annually.

The administration’s proposals came from a Cabinet-level task force that Bush formed three weeks ago. Members included Treasury Secretary Paul H. O’Neill, Labor Secretary Elaine Chao and Commerce Secretary Don Evans.

Bush has argued that the Enron debacle raised questions of “corporate governance,” insisting that it is not a political issue. But with a dozen congressional committees looking into Enron’s business practices--and a Justice Department criminal investigation underway--the controversy is likely to remain in the news for months to come and may dog Republicans in the off-year elections this fall.

Bush has been on the defensive in the Enron matter because the company has been his chief financial angel, having given an estimated $700,000 to his gubernatorial and presidential campaigns through its political action committee, employees and directors--far more than any other single U.S. corporation.

Since Enron’s collapse, the White House has disclosed that the now-ousted Enron chairman, Kenneth L. Lay, a friend of the president’s, called Evans and O’Neill, but both Cabinet secretaries said they refused to help Lay or Enron.

Such disclosures raised questions about whether Enron received special treatment because of its deep ties to the Bush administration.