[Congressional Record Volume 148, Number 29 (Thursday, March 14, 2002)]
[Senate]
[Pages S1929-S1930]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 RETIREMENT SECURITY ADVICE ACT OF 2002

  Mr. BOND. Mr. President, today I am adding my name as a co-sponsor of 
the Retirement Security Advice Act of 2002, S. 1978, introduced by my 
good friend from Arkansas, Senator Tim Hutchinson. I do so, and submit 
this statement for the Record, because the bill holds important 
implications for small businesses in this country and the millions of 
Americans they employ.
  In 1996, we created the Savings Incentive Match Plans for Employees 
SIMPLE, as a pension-plan option for small firms in this country. The 
goal was a simple one: provide a pension plan with low administrative 
costs for employers so they can offer pension benefits to encourage 
employees to save for their retirement. I am pleased that these plans 
have become quite popular, and together with the other pension 
simplifications and improvements enacted in the last five years, they 
have contributed to better access to pension benefits by small 
businesses and their employees.
  Greater retirement savings, however, have raised new and complex 
issues for many employees who have seen their pension accounts grow 
substantially. As the Ranking Member of the Committee on Small Business 
and Entrepreneurship, I have heard many constituents raise difficult 
questions in this area: What are appropriate investments for my 
personal circumstances and risk tolerance? Should I buy stocks, bonds, 
annuities, or something

[[Page S1930]]

else? How should I diversify my investments? When should I modify my 
investment mix? And so on.
  The importance of these questions has increased substantially in 
light of recent high-profile business failures and more generally 
because of the economic downtown. Gone are the days of the momentum 
market where any dollar invested seemed to grow with little effort or 
risk.
  The return to more cautious investing has left employees who 
participate in employer-sponsored pension plans in a real dilemma, hire 
an outside investment advisor or go it alone in most cases. Why? 
Current pension rules effectively preclude most employers from offering 
investment advice to their employees. In fact, recent estimates are 
that only about 16 percent of participants have access to investment 
advice through their pension plan. In today's complex investment 
environment that is simply too little help for employees who are trying 
to manage their retirement security.
  Senator Hutchinson's bill addresses this situation in a responsible 
way. For most businesses, and particularly small firms, the logical 
place to look for an investment advisor would be the company that 
manages the plan's investment options or an affiliated firm. Under 
Senator Hutchinson's bill that option would now be available, opening 
the door for countless businesses to offer this important benefit at a 
low cost to their employees who participate in the company's pension 
plan. In addition, by allowing more businesses to offer investment-
advice benefits, the bill creates an opportunity for increased 
competition among investment advisors, which can lead to better advice 
products and lower costs overall.
  Senator Hutchinson's bill, however, does not simply change the rules 
to help the business community. It also includes critical protections 
for the plan participants. Investment advisors must satisfy strict 
requirements concerning their qualifications, and they must disclose on 
a regular basis all their business relationships, fees, and potential 
conflicts of interest directly to the participants. In addition, and 
arguably most importantly, the investment advisor must assume fiduciary 
liability for the investment advice it renders to the employee 
participants in the plan. In short, if the investment advisor does not 
act solely in the interest of the participant, it will be liable for 
damages resulting from the breach of its fiduciary duty. Together, the 
bill's provisions provide substantive safeguards to protect the 
interests of the plan participants who take advantage of the new 
investment-advice benefit.

  Some have contended that a better alternative is to force small 
businesses to engage an independent third party to provide investment 
advice. I disagree. The result would simply be the same as under 
current law. Cost is a real issue for small businesses seeking to offer 
benefits like pension plans and related investment advice, hence, the 
genesis of the SIMPLE pension plan. As under the current rules, if the 
only option is a costly outside advisor, the small firm will not offer 
the investment-advice benefit. As a result, we would not move the ball 
even a yard further, employees would still be left to their own devices 
to figure out the complex world of investing or they would have to seek 
out and hire their own advisor, which few have the wherewithal to do.
  More to the point, nothing under the Hutchinson bill prevents a 
business from engaging an independent advisor if the employer deems 
that the best alternative. The standard under the Hutchinson bill for 
selecting the investment advisor is prudence; the same criteria that 
the employer must exercise under current law when selecting the company 
that manages the pension plan and its investment options. If a prudent 
person would not hire or retain the investment advisor, then under the 
Hutchinson bill, the employer should not do so either or face liability 
for breach of fiduciary duty. Again, additional protection for the plan 
participants.
  In my assessment, investment advice is an increasingly important 
benefit that employees want and need. Moreover, small businesses in 
particular need the flexibility to offer benefits that keep them 
competitive with big companies as they seek to hire and retain the very 
best employees possible. And when we talk about small business, we are 
not dealing with an insignificant employer in this country. In fact, 
according to Small Business Administration data, small businesses 
represent 99 percent of all employers and provide about 75 percent of 
the net new jobs in this country.
  The Retirement Security Advice Act provides a carefully balanced and 
responsible solution to this situation. Most importantly, it provides a 
solution that employers will actually use to offer the investment 
advice sought by their employees who struggle to put money aside in the 
hopes of having a nest egg that someday will provide them with a 
comfortable retirement. I am pleased to co-sponsor this bill and look 
forward to working with my colleague from Arkansas to see it enacted 
into law.

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