[Congressional Record Volume 151, Number 7 (Monday, January 31, 2005)]
[Senate]
[Pages S671-S672]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Baucus):
  S. 219. A bill to amend the Internal Revenue Code of 1986 and the 
Employee Retirement Income Security Act of 1974 to protect the 
retirement security of American workers by ensuring that pension assets 
are adequately diversified and by providing workers with adequate 
access to, and information about, their pension plans, and for other 
purposes; to the Committee on Finance.
  Mr. GRASSLEY. Mr. President, I rise today along with my colleague, 
Senator Baucus, the Ranking Member of the Finance Committee, to re-
introduce the National Employee Savings and Trust Equity Guarantee 
Act--or the NESTEG bill as we call it in the Finance Committee. The 
NESTEG bill would reform our pension and retirement savings laws in 
several important ways. For example, NESTEG would require companies to 
allow their employees to diversify out of company stock, a provision 
that the Committee adopted in response to the events at Enron which saw 
employees' retirement plans vanish almost over night. The NESTEG bill 
also includes other important participant protections, including 
enhanced disclosure requirements, new rules governing so-called 
blackout periods, and faster vesting of employer contributions. In 
addition, NESTEG expands the portability of retirement plan assets so 
that workers can keep money saved for retirement, and simplifies 
pension laws and regulation. The NESTEG bill also responds to the 
uncertainty in the rules governing defined benefit pensions by 
permanently adopting the yield curve as a replacement for the 30-year 
Treasury rate.
  Last year, the Finance Committee unanimously approved the NESTEG 
bill. This year, I am looking forward to seeing it signed into law. 
This bill first began in the wake of the outrageous events that went on 
in the wake of the collapse of Enron and corporate scandals at other 
companies. Over the past few years, the Finance Committee has worked 
diligently to enact reforms in a number of areas of the law to make 
sure that events like that don't happen again.
  The important pension protections in the NESTEG bill are one 
remaining area for reform. The headlines have died down, but workers' 
pensions are still too vulnerable to company failures. Thus, a central 
piece of this bill would allow employees to diversify their retirement 
plans so that they are not overly concentrated in company stock. 
Diversification is one of the hallmark principles of sound investment 
strategy, and promoting diversification should be a hallmark of our 
pension laws.
  But the NESTEG bill is not just a bill that responds to Enron-like 
situations. The NESTEG bill includes other important improvements to 
401(k) and other defined contribution plans as well. The bill makes it 
easier for employees to transfer amounts from one plan to another, 
thereby making sure that plan assets remain saved for retirement. And 
the bill includes provisions designed to make it easier and more cost 
effective for small businesses to sponsor a retirement plan. Small 
businesses are vital to our economy, and we need to encourage a level 
playing field so that workers at small businesses throughout our 
country have the same access to retirement plans as workers at Fortune 
500 companies.
  The NESTEG bill also would remove a major source of uncertainty 
plaguing our pension system by enacting the yield curve as a permanent 
replacement to the 30-year Treasury rate for pension funding. Workers 
need reliable pension funding, and employers need a reliable basis on 
which to calculate pension payments. The NESTEG bill

[[Page S672]]

also gives plan sponsors more flexibility to fund their plans well in 
good times, and restricts the ability of companies with severely 
underfunded plans to promise more benefits to work. The Administration 
has recently come forward with additional pension funding reform 
proposals, and I look forward to examining those reforms as the Finance 
Committee considers legislation in this area this year.
  Retirement security is a topic that is going to get a great deal of 
attention this year. We know we need to increase long-term savings in 
America, and we know that there are ways that we can improve our 
private retirement system. The reforms in the NESTEG bill that I am 
introducing today with Senator Baucus represent an important step 
forward in improving Americans' retirement security. As we debate 
retirement security issues this year, I look forward to working with my 
colleagues to achieve the goal of ensuring that all Americans achieve a 
secure retirement.
  Mr. BAUCUS. Mr. President, I am pleased to join my good friend 
Senator Grassley, the Chairman of the Senate Finance Committee, in 
introducing the National Employee Savings and Trust Equity Guarantee 
Act.
  Senator Grassley and I have attempted put together a bipartisan bill 
to improve the security of the pension plans that cover America's 
workers. The Finance Committee approved similar legislation in the last 
Congress. Some of the provisions in this bill that provide participant 
protections were in a bill we introduced in the 107th Congress--a bill 
designed to help us avoid another Enron retirement plan debacle.
  We all remember Enron. Thousands of workers lost their jobs. Because 
their 401(k) accounts were heavily invested in company stock, these 
workers lost most of their retirement savings as well. While the story 
of Enron's employees is no longer new, others companies unfortunately 
have risen up, or fallen down, to take Enron's place.
  This country is in the middle of a discussion about retirement 
security. The administration is recommending that we introduce 
investment risk into the Social Security system--a system that is the 
sole source of retirement income for one-fifth of our senior citizens, 
and the primary source for almost two-thirds of seniors. Before we 
introduce risk into Social Security, the bedrock of our retirement 
system, we need to take a hard look at how we can reduce risk to 
participants in the private retirement system. That is what this bill 
is about.
  Pension legislation is challenging. Companies offer plans 
voluntarily. If we value employer-sponsored retirement plans--and I 
do--we need to be careful not to make them so burdensome that companies 
will stop offering them. At the same time, workers have the right to 
basic protections to make sure that the money that they are counting on 
for retirement is really there when the time comes.
  I believe that this bill strikes that balance. It phases out the 
ability companies have to keep workers locked into company stock in 
their retirement plans. But it does not limit those workers' ability to 
invest in that stock if they decide that doing so is best for them.
  To help make that decision, we give workers tools to make good 
decisions, and really understand the consequences of their actions. We 
require the issuance of benefit statements so workers know how much 
their accounts are worth and how much company stock they already own. 
And we provide a safe harbor to make it easier for employers to make 
independent investment advice available if they want to.
  The challenge inherent in legislating for a voluntary pension system 
is particularly sensitive when the subject is defined benefit plan 
funding. When we discuss and debate funding proposals, we need to 
consider the health of PBGC, the participants who are counting on 
defined benefit pensions and the employers who have been willing to 
promise these benefits.
  The Pension Benefit Guaranty Corporation insures defined benefit 
plans covering forty-four million Americans. As recently as 2001, PBGC 
had a projected surplus. Now PBGC has a projected deficit of $23 
billion. And this deficit represents unfunded guaranteed benefits. 
Sadly, many participants were promised benefits in excess of those 
guaranteed by PBGC. These participants planned their retirement around 
a benefit promise, only to have the rug pulled out from under them. We 
must strengthen the funding of defined benefit pension plans so 
promises made can be kept. This bill takes some important steps toward 
this goal.
  First, this bill provides a permanent replacement for the 30-year 
Treasury rate used to calculate minimum funding requirements for 
defined benefit plans. Congress passed a temporary substitute last 
year, but our temporary fix expires at the end of this year. This bill 
would extend the current corporate bond rate for an additional year, 
and then begin phasing in the yield curve--a set of rates that 
recognizes that you will get a different interest rate on a 5-year loan 
than on a 15-year loan.
  This bill increases the deductible limit on company contributions to 
defined benefit pension plans. This is so critical. We must allow 
companies to contribute more in good times, to build a cushion for bad 
times.
  Under this bill, plans of financially-distressed companies that are 
less than 50 percent funded would not be allowed to continue promising 
additional benefits until either the funding improves, or the company's 
financial footing is more solid. This is a tough provision. But we have 
to make sure that employees receive benefits that they have earned. We 
have to do our best to make companies pay for promises they have made. 
But when a company cannot pay for more promises, we must be willing to 
step in and say ``No more promises.''
  This bill has a number of other provisions that will make it easier 
for a worker to move retirement plans from employer to employer, or 
from an employer plan to an IRA. There are also provisions that make it 
easier to administer retirement programs.
  I look forward to continuing to work with the Chairman of the Finance 
Committee, Senator Grassley, to see the National Employee Savings and 
Trust Equity Guarantee Act through to enactment. I urge my colleagues 
to join us in working toward a more secure retirement for millions of 
Americans.
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