[Congressional Record Volume 148, Number 43 (Wednesday, April 17, 2002)]
[Senate]
[Pages S2847-S2849]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Ms. Snowe, Mrs. Feinstein, and Mr. 
        Chafee):
  S. 2190. A bill to amend the Internal Revenue Code of 1986 and the 
Employee Retirement Income Security Act of 1974 to provide employees 
with greater control over assets in their pension accounts by providing 
them with better information about investment of the assets, new 
diversification rights, and new limitations on pension pla blackouts, 
and for other purposes; to the Committee on Finance.
  Mr. KERRY. Mr. President, I rise today with a great deal of 
pride to introduce the Senate's first bipartisan

[[Page S2848]]

pension reform bill since Enron's downfall ruined the lives of 
thousands of workers and their families. I am introducing this bill 
with Senator Olympia Snowe of Maine, who has worked closely with me to 
develop a much-needed proposal that will greatly help our nation's 
workers to achieve greater pension security and receive better 
investment information and advice. Our bill is called the ``Worker 
Investment and Retirement Education Act of 2002,'' or the WIRE Act. 
Senator Snowe and I are pleased that Senator Feinstein and Chafee have 
joined with us as original cosponsors.
  As you know, Enron's bankruptcy, which caused thousands to lose their 
retirement savings, since their pensions were invested heavily in Enron 
stock, has prompted many members of Congress in both parties to 
introduce pension-related legislation. President Bush has also 
suggested several reforms. Many of these proposals share some common 
elements, while others contain measures that are objectionable to one 
side or the other. Senator Snowe and I share the view that worker 
retirement protection is much too important to become another partisan 
issue, where the upcoming elections cloud our judgment and prevent us 
from passing much-needed legislation. We can, and should, pass critical 
pension reform this year that helps American workers fee secure about 
their retirement savings. In my view, the playing field has been tilted 
against workers for far too long, and it is unfortunate that it takes a 
travesty like Enron to make those of us in Congress act in their 
interests.
  Of course, the pension issue is one that falls in the jurisdiction of 
two Senate committees. I strongly support Senator Kennedy's bill, which 
recently passed out of the HELP committee here in the Senate. Soon, 
however, the Senate Finance Committee will also consider pension 
reform. Given that the history of that Committee is one in which the 
best bills are often bipartisan, I wanted to work with Senator Snowe to 
develop a pro-worker bill for the Finance Committee that can be 
combined with Senator Kennedy's bill later on.
  The House of Representatives has also followed such a two-committee 
approach, although I have some significant reservations that the final 
bill that passed last week does not do enough for workers. I hope to 
work within the Finance Committee and with Senator Kennedy to develop a 
better bill here in the Senate, so we can pass legislation this year 
that the President will sign. Our goal should be to pass a bill that 
receives a two-thirds vote in both chambers not because we think 
President Bush will veto it, but because we want to signal to the 
country that partisan politics can be pushed aside when the true 
interests of hard-working Americans are at stake.
  Despite all of the news in recent months about corporate greed and 
excess, recent polls show that nearly two-thirds of the public believes 
that the most important issue with Enron's collapse is the loss of jobs 
and savings. With 38 million people controlling nearly $1.7 trillion in 
401(k) plan assets, and with nearly 40 percent of large-plan assets 
tied up in company stock, much of which cannot be sold until workers 
reach a certain age, it is clear that the playing field needs to be 
tilted back towards workers. Our bill does just that, and because it is 
a complete approach, including all types of so-called ``defined 
contribution'' plans, as opposed to just some plans, it does so without 
opening any major new loopholes that would allow workers to be 
further exploited.

  The first thing workers need out of a pension reform bill is better 
information, because for millions of Americans, their retirement 
savings is their only true asset other than their homes. Under our 
bill, all covered workers would be given basic, unbiased information on 
the basics of investing, as well as personalized information from their 
employers to help them know if they are adequately preparing for their 
retirement years. This additional information will make a huge 
difference to millions of workers who currently have no knowledge about 
the basics of investing, or if they are saving enough to live 
comfortably in retirement.
  Next, since current law prevents most workers from receiving any 
sound guidance about financial planning, our bill includes the text of 
S. 1677, the Bingaman-Collins investment advice bill. Under this bill, 
millions more workers will benefit from professional, independent 
investment advice paid for by their employers. Workers will be able to 
select appropriate investments and better plan for their retirements 
without the creation of new conflicts of interest.
  Like other bills, our bill addresses the issue of blackout periods, 
those times when plan participants are prevented from making changes to 
their asset allocations. Senator Snowe and I believe that companies 
should provide adequate notice before any blackout period, our bill 
requires 30 days' notice, and inform workers of its expected length. In 
addition, blackouts should generally be limited to 30 days for plans 
that are heavily invested in company stock. Exemptions could be granted 
to small businesses or companies in unusual circumstances, such as a 
merger. This latter rule is one that distinguishes our bill from many 
of the others. But it seems common-sense to use that plans with more 
volatile assets, such as plans heavily invested in company stock, 
should be forced to end blackout periods as quickly as possible in 
order to minimize market risk for the workers.
  Moreover, during blackout periods, management should be prohibited 
from selling large blocks of stock on the open market. We command 
President Bush for suggesting this additional protection for rank-and-
file employees, and we will work with him to help it become law.
  But most important, workers want and deserve a greater say in where 
their money is invested. Diversification is a key principle in any 
balanced investment strategy. Workers should be empowered with the 
ability to direct where their retirement savings are invested.
  While the shift to more broad-based stock ownership is generally a 
positive trend in our society, employees should no longer be forced to 
buy company stock with their own contributions. In addition, if workers 
choose to buy company stock with their own funds, they should be able 
to diversify these contributions whenever they wish. It's their money, 
after all, and they should never be forced to relinquish control of it.
  For employer contributions to retirement plans, workers should be 
allowed to begin diversifying these contributions once they are vested 
in the plan. Our bill accomplishes that goal while avoiding new 
loopholes by applying different diversification rules based on the type 
of contribution, worker payroll deduction, employer matching 
contribution, or employer nonmatching contribution, rather than the 
type of plan. We want to make sure that the situation with Enron never 
happens again, and the protections in our bill will accomplish that 
goal.
  In our view, Congress should also provide special diversification 
rights for older workers, because the closer you are to retirement, the 
more you have to lose should stock prices fall. Therefore, under our 
bill, once a worker turns 55, he or she would be permitted to 
completely diversify their retirement assets, with no restrictions. 
This will be the case regardless of tenure with the firm, and 
regardless of the type of plan. Companies must notify workers of this 
right to diversify when the worker has reached 55 years of age, thereby 
giving older workers the additional layer of protection they deserve 
after a lifetime of work and saving.
  I want to say a word about ESOPs. Employee stock ownership plans are 
important in that they give rank-and-file employees an ownership stake 
in their firms, which is largely a good thing. We should continue to 
encourage firms, both public and private, to include their workers in 
their success. Many public companies are converting parts of their 
401(k)s to ESOPs to take advantage of a feature in the tax code that 
allows them to deduct dividends paid on the shares in the plan. 
However, these conversions to so-called KSOPs have downsides, in that 
these plans are generally more restrictive than 401(k)s when employee 
diversification right are concerned.
  As a result, Congress must include both KSOPs and ESOPs in any new 
diversification rules, to the extent that the plans are at public 
companies. If we fail to include them, or include one but

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not the other, we would open a new loophole while limiting workers 
rights. But again, since broader employee ownership is a generally 
positive development, we need to help workers without killing publicly-
traded ESOPs. Our bill does so. Plus, another unique feature of the 
Kerry-Snowe bill is that for all workers under age 55 who choose to 
diversify some of their KSOP or ESOP shares, the firm will still be 
allowed to deduct for tax purposes the dividends that would have been 
paid on those shares, for the year of the sale and the following two 
years. This provision will smooth the transition to a more worker-
friendly system.
  Finally, the government should create an Office of Pension 
Participant Advocacy, similar to the Taxpayer Advocate Service, where 
both unionized and non-unionized workers can turn to voice their 
concerns about pension policy. The Pension Participant Advocate would 
issue an annual report to Congress recommending changes to the pension 
laws. This idea is one that appears in several bills before Congress, 
and it is long overdue.
  All of these proposals will protect our workers, and more 
importantly, they will do so without prompting reductions in benefits. 
Businesses could still contribute stock to retirement plans. Workers 
will be empowered to diversify their assets, but they would not face 
any new rules that limit their own choices, such as a hard cap on the 
amount of a single stock they could own. Our bipartisan approach will 
ensure that workers are better off in the long run, and that's the 
outcome we all want.
 Ms. SNOWE. Mr. President, I rise today to join Senator Kerry 
in introducing the Worker Investment and Retirement Education, or WIRE, 
Act of 2002. The WIRE Act seeks to empower workers by giving them 
control over all of the assets in their retirement accounts and ensures 
that, in addition to having the ability to take command of assets, they 
have the information they need to make sound and informed choices.
  While the need for pension reform was highlighted by the recent 
collapse and bankruptcy of Enron, a review of pension regulations is 
critical for all of the approximate 48 million workers nationwide who 
participate in a defined contribution retirement plan.
  And, as Congress sets out to review existing pension laws, we must 
recognize that there has been a significant shift in Americans' 
retirement savings vehicles over the past several years. In fact, use 
of what we think of as the typical ``pension'', or defined benefit 
plan, has fallen from one-third of all plans to one-tenth in 20 years. 
And, the actual number of defined benefit plans has fallen each year 
since 1986. Although they still account for almost 45 percent of all 
employer-sponsored retirement plan participants, that figure was much 
higher, at 74 percent, just 20 years ago.
  This shift away from defined benefit plans has resulted in the 
explosion of participation in defined contribution plans, giving 
individuals the opportunity to make investment decisions according to 
their own needs and plans for the future. However, with this ability 
comes added responsibility and, depending on the investment choice, 
greater risk. And it is this risk that was so clearly personified by 
the experience of Enron employees.
  On Enron's 40,000 employees, almost 21,000 were participating in the 
Enron Savings Plan, the 401(k) plan. These loyal employees heavily 
invested in Enron, only to be hit by the one-two punch of losing their 
jobs and losing their life savings, with the retirement savings losses 
amounting to over $1 billion. It is their experience that has led us to 
write the legislation we are introducing today.
  While it is critical that the Congress ensure that such a massive 
loss of retirement savings never reoccurs, it is also vital that we 
consider reforms that empower employees, and do not discourage 
employers from contributing to their employees' retirement plans. As we 
set out to draft the WIRE Act we sought first and foremost to do no 
harm to the private pension system.
  The WIRE Act, in seeking to increase employees' access to information 
and ensure that employees have the knowledge necessary to make sound 
investment decisions, requires that individual workers receive annual 
statements regarding the assets in their accounts. In addition, our 
legislation directs the Departments of Labor and the Treasury to 
produce annually a document for all employees giving them basic 
guidelines for retirement investing. This assures that employees 
receive fundamental investment information from an independent 
authority.
  Additionally, the WIRE Act incorporates the language of the 
Independent Investment Advice Act of 2001, clarifying the fiduciary 
rules for plan sponsors who offer access to investment advice by 
providing companies with a safe harbor from liability if they provide 
qualified, independent investment advice for their workers.

  Just as it is critical that we provide access to the information 
necessary to make informed decisions, it is essential that we increase 
employees' diversification rights without inhibiting an employee's 
ability to invest in their company.
  And, certainly a review of the investment decisions of employees 
across the country tells us that the decision of Enron employees to 
invest their retirements heavily in Enron stock is not unique. In fact, 
the employees of many of America's leading companies, our top brand 
names, have chosen similarly to invest more than half of their 
retirement plan assets in company stock, Procter and Gamble, 94.7 
percent, Sherwin-Williams, 91.6 percent, Pfizer, 88.5 percent, 
McDonald's, 74.3 percent, the list goes on and on.
  And so where does that leave us? How does Congress balance an 
individual's right to make their own investment decisions, with trying 
to make sure that no other class of employees suffer as significant a 
loss as that experienced by Enron employees?
  The WIRE Act proposes that the answer to these questions lies in the 
ability of employees to access and diversify company stock. Therefore, 
we create specialized diversification rights that are dependent upon 
the manner in which the stock was added to the employee's account.
  For instance, for voluntary purchases of company stock by employees, 
workers should be able to diversify those shares at any time, after 
all, it is their own money. For employer-matching contributions made in 
the form of company stock, half of those shares can be diversified 
after three years of service, and one hundred percent can be 
diversified after five years of service.
  Importantly, as our intent is to first do no harm to the current 
employer-sponsored pension system, the WIRE Act attempts to mitigate 
any potential loss of tax incentives enjoyed by employers for making 
contributions in the form of company stock when that stock is 
diversified. We do this by allowing employers to continue to deduct the 
dividends that would have been paid on employee held company stock for 
the remainder of that calendar year and for two additional years. This 
provision, which is unique to the WIRE Act, would ensure that the 
diversification rights given to employees does not have the unfortunate 
effect of reducing employer contributions to pension plans--which would 
be harmful to both the employees and the employers.
  The bill we introduce today aims to do nothing to limit personal 
choice, which is the cornerstone of American beliefs, but instead 
empower investors with the knowledge and ability to make some of the 
most fundamental financial decision a person can make. However, as we 
begin to consider how best to empower and educate employees, it is just 
as essential that we do not create any disincentives for employers to 
stop participating in their employees' retirement security. Employers 
play a critical role in the retirement planning of their employees and 
it is critical that we encourage this role to continue.
  Retirement is part of the American dream, and to that end we must do 
whatever we can to ensure that this dream is achievable for everyone. I 
look forward to working with the other members of the Finance 
Committee, and the Senate, to consider addressing the need for pension 
reform.




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