Sen. Grassley Proposes Bill to Protect Retirement Funds

A top Senate Republican on Tuesday proposed new retirement-fund protections that seek a middle ground between plans from the White House and congressional Democrats.

Sen. Charles E. Grassley of Iowa, senior Republican on the Senate Finance Committee, suggested a 20% tax on stock sales by executives when other workers are prevented from selling shares in their 401(k) retirement plan because of administrative restrictions.

Grassley’s bill also would give workers new vesting and diversification rights, such as allowing them to sell company stock after they’ve been with the company for three years. Currently, companies can restrict matching contributions, such as by preventing employees from selling company stock until they reach age 55 or have 10 years of service.

The bill is designed to prevent a repeat of the situation at Enron Corp., where employees lost an estimated $850 million in their retirement accounts when the energy trader collapsed.

“We can’t allow what happened to Enron employees to happen to other employees,” Grassley said. “It could happen to other companies in the future if Congress doesn’t act.”

Grassley’s plan is similar to proposals offered by President Bush. Both would require a 30-day notice to workers before so-called lockdown periods, when workers are barred from selling their stock. Bush’s plan also would require companies to allow employees to sell company stock in their plans after three years.

Bush didn’t propose the 20% tax on executive stock sales. And unlike Bush, Grassley wouldn’t encourage companies to provide investment advice to workers, saying this would present conflicts of interest if the advisors didn’t act in the employees’ best interest.

“There’s a lot of disagreement over how to get advice to the workers who need help,” Grassley said. Instead, he’s urging retirement education.

Grassley’s plan doesn’t go as far as some Democrats’ proposals, such as a bill sponsored by Sen. Barbara Boxer (D-Calif.), which would let workers hold no more than 20% of their retirement funds in company stock.

Grassley said he hasn’t heard a reaction to his plan from Finance Committee Chairman Max Baucus (D-Mont.).