[Congressional Record Volume 143, Number 21 (Tuesday, February 25, 1997)]
[Extensions of Remarks]
[Page E314]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   THE 401(k) PENSION PROTECTION ACT

                                 ______
                                 

                          HON. GARY A. CONDIT

                             of california

                    in the house of representatives

                       Tuesday, February 25, 1997

  Mr. CONDIT. Mr. Speaker, I have today introduced the 401(k) Pension 
Protection Act of 1997. Last year I introduced a similar bill, H.R. 
3688. This legislation would close an important gap in pension 
protection affecting tens-of-millions of working Americans.
  Federal law currently provides less protection to participants in 
401(k) plans than it provides to participants in traditional pension 
plans. A traditional plan may not invest more than 10 percent of its 
assets in the company sponsoring the plan. The purpose of this 
limitation is the protection of employees who might otherwise lose 
their jobs and pensions at the same time.
  This limitation does not apply to 401(k)s, despite their having 
become the predominant form of American pension plan, enrolling 23 
million employees and investing nearly $700 billion. When a company 
goes bankrupt with a large percentage of its 401(k) invested in the 
company, the impact on employees can be catastrophic. The largest 
department store chain in California went bankrupt with more than half 
of its 401(k) invested in the chain's stock, 10,000 401(k) 
participants, many near retirement after decades of work, lost 92 
percent of their stock investment.
  The 401(k) Pension Protection Act would prevent this from occurring. 
The bill applies the 10 percent limit to 401(k)'s--unless the 
participants, not the company sponsoring the plan, make the investment 
decisions. After all, it is the employees' money, they bear the 
investment risk, and their 401(k)'s, unlike traditional plans, have no 
Pension Benefit Guaranty Corporation insurance. No participant should 
be required to invest more than 10 percent of his or her 401(k) 
contribution, known as a salary deferral, in the company sponsoring the 
plan.
  Mr. Speaker, millions-of-Americans are working hard every day to save 
for their retirement and provide for their families. Enactment of this 
legislation will protect the retirement assets of working Americans. I 
urge our colleagues to join me in support of this important measure.

                                H.R. --

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``401(k) Pension Protection 
     Act of 1997''.

     SEC. 2. SECTION 401(K) INVESTMENT PROTECTION.

       (a) Limitations on Investment in Employer Securities and 
     Employer Real Property by Cash or Deferred Arrangements.--
     Paragraph (3) of section 407(d) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1107(d)) is amended by 
     adding at the end the following new subparagraph:
       ``(D) The term `eligible individual account plan' does not 
     include that portion of an individual account plan that 
     consists of elective deferrals (as defined in section 
     402(g)(3) of the Internal Revenue Code of 1986) pursuant to a 
     qualified cash or deferred arrangement as defined in section 
     401(k) of the Internal Revenue Code of 1986 (and earnings 
     thereon), if such elective deferrals (or earnings thereon) 
     are required to be invested in qualifying employer securities 
     or qualifying employer real property or both pursuant to the 
     documents and instruments governing the plan or at the 
     direction of a person other than the participant (or the 
     participant's beneficiary) on whose behalf such elective 
     deferrals are made to the plan. For the purposes of 
     subsection (a), such portion shall be treated as a separate 
     plan. This subparagraph shall not apply to an individual 
     account plan if the fair market value of the assets of all 
     individual account plans maintained by the employer equals 
     not more than 10 percent of the fair market value of the 
     assets of all pension plans maintained by the employer.''.
       (b) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Transition rule for plans holding excess securities or 
     property.--
       (A) In general.--In the case of a plan which on the date of 
     the enactment of this Act, has holdings of employer 
     securities and employer real property (as defined in section 
     407(d) of the Employee Retirement Income Security Act of 1974 
     (29 U.S.C. 1107(d)) in excess of the amount specified in such 
     section 407, the amendment made by this section applies to 
     any acquisition of such securities and property on or after 
     such date, but does not apply to the specific holdings which 
     constitute such excess during the period of such excess.
       (B) Special rule for certain acquisitions.--Employer 
     securities and employer real property acquired pursuant to a 
     binding written contract to acquire such securities and real 
     property entered into and in effect on the date of the 
     enactment of this Act, shall be treated as acquired 
     immediately before such date.