[Congressional Record Volume 148, Number 42 (Tuesday, April 16, 2002)]
[Extensions of Remarks]
[Pages E533-E534]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      PENSION SECURITY ACT OF 2002

                                 ______
                                 

                               speech of

                           HON. MARGE ROUKEMA

                             of new jersey

                    in the house of representatives

                        Thursday, April 11, 2002

  Mrs. ROUKEMA. Mr. Speaker, I am deeply concerned about Enron 
employees and retirees who invested a substantial portion of their 
retirement assets in Enron stock and are now facing financial 
uncertainty. I would like to commend Chairman Boehner for working 
expeditiously to produce a package of reforms that will help protect 
the retirement savings of millions of American workers.
  By virtue of my service on two key Committees--the Committee on 
Education and Workforce and the Committee on Financial Services--I wear 
more than one hat when it comes to Enron. As you know, the Financial 
Services Committee is working to determine how the regulatory system 
failed in the Enron case and how reforms could correct these 
shortcomings. Our focus today is retirement security. The issues raised 
by the Enron bankruptcy have serious implications for millions of 
Americans who depend on their employers' pension plans for their 
retirement. Our actions today will help to protect nearly 50 percent of 
American households.
  I represent a section of the country that has become known as a 
bedroom community for thousands of men and women who work every day in 
one of the most important financial districts on the planet. The 
confidence of these professionals has been shaken over the past few 
months. They come to doubt some of the very institutions they 
previously had come to rely on. It is obvious that these concerns are 
echoed throughout the country.
  Since the enactment of ERISA in 1974, almost half of American 
households have joined the ``shareholder society'' by investing in the 
stock market, many through their employer-provided defined contribution 
plans. Today, 42 million workers hold 401(k) accounts amounting to $2.0 
trillion in retirement assets. Private pension plans--including 
401(k)s--are crucial to retirement security for millions of Americans. 
These workers need to have full confidence in the security of their 
pension plans.
  We have spent considerable time over the years promoting expanded 
pension coverage and portability. But we have also tried to ensure that 
American workers' pensions and retirement savings are protected. I have 
always argued that there are three necessary components of a successful 
retirement system: (1) accessibility; (2) security; and (3) 
information.
  These are exactly the issues that we are facing today. We need to 
provide our workers easier access to pensions so that they have the 
ability to save for retirement. We must ensure that retirement savings 
are secure. And we must ensure that workers have the information they 
need to make wise choices to fully achieve their retirement goals.
  The bill before us today addresses all of these important points. The 
Pension Security Act of 2002 will: (1) provide workers greater freedom 
to diversify and manage their own retirement funds; (2) give workers 
quarterly information about their investments and rights to diversify 
them; (3) expand workers' access to investment advice; and (4) ensure 
that senior corporate executives are held to the same restrictions as 
average American workers during ``blackout periods.''
  In spite of the flaws exposed by the Enron debacle, we must be 
careful not to dissuade employers from providing such plans to their 
workers. Even while we make reforms to protect retirement savings, we 
must continue to encourage employers to make generous contributions to 
workers' 401(k) plans.
  Workers must also be free to choose how to invest their retirement 
savings. It is not our role to tell employees how to manage their 
pension plans. However we can ensure that employees have the ability to 
sell company stock and diversify into other investment options. And we 
can also guarantee employees access to information and advice regarding 
their pensions and investments. We have already recognized the 
importance of equipping workers with the knowledge to make wise 
decisions for their future, but we must now make this proposal a 
reality.
  I am pleased that this bill contains important provisions to work 
toward ensuring fiduciary responsibility. Specifically, at Committee 
markup I offered two amendments which are contained in the bill before 
us today.


               educational resources for plan fiduciaries

  The first provision requires the Secretary of Labor to ensure that 
information and educational resources are made available to persons 
serving as fiduciaries under employee benefit plans in order to assist 
them in diligently and effectively carrying out their fiduciary duties.
  There has been a lot of talk on Capitol Hill about the rigorous 
fiduciary duties under ERISA. Many argue that ERISA subjects 
fiduciaries to what is considered the highest fiduciary obligation in 
the law, namely an express trust.
  ERISA requires that fiduciaries have a duty of loyalty, prudence, 
diversification, and that they act in accordance with plan documents. 
Plan fiduciaries are required to discharge their duties ``solely in the 
interest of participants and beneficiaries'' and for the ``exclusive 
purpose'' of providing benefits and defraying reasonable expenses of 
administering the plan.''
  The law requires that the ``assets of a plan shall never inure to the 
benefit of any employer.'' It requires that fiduciaries act with the

[[Page E534]]

care, skill, prudence, and diligence that a prudent person familiar 
with such matters would use in similar circumstances.
  The responsibilities of fiduciaries are very clear in ERISA. I know 
these rules exist and the ERISA lawyers know it too--The problem is 
that oftentimes the actual fiduciaries are not aware of or do not 
understand these strict rules governing their behavior.
  What the Enron debacle has brought to light is that this carefully 
crafted law of fiduciary responsibility is not always followed with the 
due diligence that is expected. Many people who are charged with 
operating employee benefit plans do not understand what their fiduciary 
roles require. Even worse, many do not understand the consequences for 
violating their fiduciary obligations.
  This was a problem at a large company like Enron, as we learned from 
the testimony of one Enron fiduciary, Cindy Olson. We can be assured 
that the fiduciaries for other companies are likewise not adequately 
informed about their responsibilities in managing a pension plan.
  Dr. Norman Stein testified in front of the Education and Workforce 
Committee that during a pension-counseling clinic at the University of 
Alabama, a personnel manager ``indicated that she did not know what a 
fiduciary was, did not know what rules governed a fiduciary behavior, 
and did not, of course, realize that she herself was a fiduciary.''
  This is what is happening in the real world. How can we, in good 
conscience, tell American workers to entrust their retirement security 
to fiduciaries who do not understand the rules that govern their 
behavior? How can we ensure that fiduciaries are acting in the sole 
interest of participants and beneficiaries if they don't even know this 
requirement exists?
  I believe that this provision is a modest first step in addressing 
this lack of knowledge. The Secretary is directed ``to establish a 
program under which information and educational resources are made 
available on an ongoing basis to persons serving as fiduciaries under 
employee benefit plans so as to assist them in diligently and 
effectively carrying out their fiduciary duties.''
  This provision is just common sense. It addresses an issue that most 
of us thought was a given in the implementation of ERISA. The Enron 
case has demonstrated that we were incorrect in making that assumption. 
The Department of Labor must ensure that fiduciaries understand their 
responsibilities under the law. Information dissemination is a 
necessary first step in preventing breaches of fiduciary duties.
  I am pleased that my amendment was accepted unanimously by the 
Committee and thank the Chairman for ensuring that it is contained in 
the bill that we are voting on today.


                  Independent Advisors for Fiduciaries

  The second amendment that was unanimously accepted by the Committee 
and is included here requires a study of the implications of requiring 
an independent advisor to provide investment guidance to fiduciaries 
regarding the management or disposition of plan assets.
  I am very concerned about the inherent problems of conflict of 
interest when a firm must both manage a pension plan and maximize 
profit. This conflict of interest is particularly acute when the 
employer has exclusive control over retirement plans.
  As we learned all too well from our hearings on the Enron crisis, 
this conflict of interest is real and can be detrimental to plan 
participants. Outside experts would be able to give independent advice 
to the plan fiduciaries because they are not beholden to the employer.
  It makes sense that competent professional advisors should assist 
with retirement plan investment management. Employers' strict fiduciary 
responsibilities should necessitate consultation with competent 
investment managers. Some employers do this. However, as we saw with 
Enron, others do not. In fact, in the case of Enron, the Department of 
Labor has taken steps to replace Enron's fiduciaries with independent 
experts. Every day we talk about the lessons we have learned from the 
Enron fiasco. This sounds like a lesson to me. How can we correct the 
situation of Enron and ignore the case of all other workers? Must we 
wait for other companies to reach the disaster point of Enron before we 
ensure that independent advisors assist with plan management? Every 
plan should have the benefit of an independent advisor to assist with 
plan management. If it makes sense for Enron after-the-fact, it makes 
sense for all businesses before there is a problem! What we saw in 
Enron is that when the interest of the plan participants was pitted 
against company interests, the participants lost.
  As such, we should seriously study the implications of requiring 
employers to hire an independent advisor to assist in the management of 
plan assets. Rather than requiring that a new trustee board be created 
or requiring that the independent advisor serve as a plan manager, I 
believe we should investigate the implications of requiring that plan 
managers seek advice and guidance from an independent source regarding 
the management or disposition of plan assets. This is a common sense 
approach.
  I do understand that some employers may be concerned about the 
implications of such a proposal. This bill requires a study of the 
issue so we can better understand the specific impact on retirement 
savings of requiring fiduciary consultants for individual account 
plans. Specifically, the study would assess:
  (1) The benefits to plan participants and beneficiaries of engaging 
independent fiduciary advisers to provide investment advice regarding 
the assets of the plan to persons who have fiduciary duties.
  (2) The extent to which independent advisers are currently retained 
by plan fiduciaries.
  (3) The availability of assistance to fiduciaries from appropriate 
Federal agencies.
  (4) The availability of qualified independent fiduciary consultants 
to serve the needs of accounts in individual account plans in the 
United States.
  (5) The impact of the additional fiduciary duty of an independent 
advisor on the strict fiduciary obligations of plan fiduciaries.
  (6) The impact of consulting fees, additional reporting requirements, 
and new plan duties to prudently identify and contract with qualified 
independent fiduciary consultants on the availability of individual 
account plans.
  (7) The impact of a new requirement on the plan administration costs 
per participant for small and mid-size employers and the pension plans 
they sponsor.


                               CONCLUSION

  In sum, I am committed to strengthening the retirement security of 
workers and their families. I believe that this bill takes important 
steps to further protect plan participants and I urge my colleagues to 
support this legislation.

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