[Congressional Record (Bound Edition), Volume 147 (2001), Part 20]
[Extensions of Remarks]
[Pages 27573-27574]
[From the U.S. Government Publishing Office, www.gpo.gov]



       INTRODUCING THE RETIREMENT ACCOUNT PROTECTION ACT OF 2001

                                 ______
                                 

                            HON. KEN BENTSEN

                                of texas

                    in the house of representatives

                       Tuesday, December 18, 2001

  Mr. BENTSEN. Mr. Speaker, I am introducing legislation to address one 
troubling issue raised in the wake of the Enron Corporation's sudden 
stunning demise--the lockdown of Enron employee 401(k) accounts. The 
Retirement Account Protection Act of 2001 (RAPA) will bar employers 
from unilaterally and arbitrarily freezing sales of company stock by an 
employee from their 401(k) pension plans or other Employee Stock 
Ownership Plans (ESOPs).
  Mr. Speaker, while we accept that lockdowns are often ordered in the 
routine course of plan management by a business, the simple fact is 
that they unfairly tie the hands of employees. The sudden collapse of 
the Enron Corporation illustrates how the impact of a lockdown can 
damage the retirement security of employees. As part of a routine 
switch of administrators for its employees' 401(k) program, Enron froze 
employee retirement accounts, packed with its stock, right as shares 
plummeted in late October and early November. When all was said and 
done, Enron Corporation's 401(k) plan lost about $1 billion in value. 
Enron employees assert that during the lockdown, they could only watch 
in horror as the value of their company stock fell from $30.72 at the 
close of trading on October 16 to $11.69 on November 19. The anxiety 
about their jobs was compounded by their inability to protect their 
retirement savings from decimation.
  Under RAPA, employers would have to petition the Secretary of Labor 
for permission to order an administrative lockdown or freeze of 
employee defined contribution plans. The Secretary would apply a three-
part test and the lockdown would be permitted if the Secretary found it 
to be administratively feasible, in the interests of the plan and its 
participants and, most importantly, ``protective of the rights of 
participants and beneficiaries of the plan.'' Presently, freezes or 
lockdowns of employee transactions in the Employer stock plans are 
routinely ordered for administrative reasons such as switches in 
benefit administrators or during transition times associated with 
corporate mergers. My bill also orders the appropriate regulators to 
study the advisability of imposing a cap on company stock purchases by 
employees for their defined contribution plans, in the wake of Enron's 
demise and the devastation of thousands of retirement accounts. There 
are serious questions about the prudence of imposing diversification 
requirements on employee investments.
  Under RAPA, employers who are granted an exemption by the Secretary 
of Labor could then order a lockdown or freeze of account activity, but 
not before giving employees adequate notice. Under my bill, current 
employees, former employees and pension plan beneficiaries would 
receive written notice of the lockdown at least ninety days prior to 
the effective date. The importance of providing timely, adequate 
written notice to all effected parties, regardless of whether they 
still are employed, cannot be overstated. Former Enron employees who 
were plan participants, but no longer had access to Enron's internal e-
mail network, report that the first time they received notice of the 
lockdown was when they tried to sell their company stock.
  Mr. Speaker, the Employee Retirement Income Security Act (ERISA) has 
done a good

[[Page 27574]]

job of protecting the interests of plan participants and beneficiaries, 
particularly with respect to defined benefit plans. But, since 
enactment of the ERISA in 1974, the nation's landscape has changed 
substantially. Though the number of employer-sponsored pension plans 
have steadily increased, proportionately fewer employers offer 
traditional defined benefit plans and, instead, offer defined 
contribution plans such as 401(k) or ESOPs. The growth in defined 
contribution plans has resulted in a shift of responsibility, from the 
employer to the employee, with respect to how the funds should be 
invested. Mr. Speaker, my bill seeks to amend ERISA to ensure that 
employees continue to have the right to oversee their investments 
without interference by their employer.
  Under RAPA, employers would no longer have the unfettered discretion 
to undertake such actions. While there is nothing that the Congress can 
do to guarantee against downturns in the value of company stock, we can 
ensure that employees retain the same right that any investor has to 
take whatever actions they deem necessary to protect their retirement 
savings, including selling company stock.

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