Rep. Peter Deutsch was joined by Rep. Gene Green in introducing the Pension Protection Act of 2001 today, legislation which restricts the employee 401 (k) contribution to no more than ten percent in company stock. Employer matches would be unaffected by this restriction. Additionally, the initiative includes a provision that allows for the divestiture of employee stock three years after acquisition.
After the financial community watched the collapse of Enron Corporation, Enron employees witnessed the destruction of their retirement security.
According to Securities and Exchange Commission filings, Enron employees had a total of 62 percent of 401(k) assets invested in company stock at the beginning of the year. Attorneys for Enron employees estimate that workers have lost more than $1 billion of their retirement funds.
The current financial situation with Enron is an example of the risks that are involved when a company invests most of the employees 401(k) plan in its own stock, Green said. This was an adequate system until that stock price declined to pennies on the dollar. Many of its employees lost thousands of dollars due to restrictions on diversifying their 401(k) plans.
This legislation is based on the proven principle
that broad diversification is the most successful approach to long term retirement investing. Employees should not be forced to gamble with their retirement security.
This bill is a first step to revise the way 401(k) plans are set up in an effort to avoid another retirement catastrophe as it happened with Enron. Diversity is the key to a sound financial future and I look forward to working with employers to safeguard their employees investments, Green concluded.
The employees at Enron have suffered devastating losses to their retirement savings, Deutsch continued. The Federal Government must ensure that the pensions of hard working Americans at other companies do not suffer the same fate.
Rep. Deutsch introduced the measure today and has already received interest from some of his colleagues who would like to join as a co-sponsor of this initiative. Rep. Frost of Texas, Rep. Barbara Lee of California, and Rep. Lipinski of Michigan join Rep. Green as an original co-sponsor of this legislation.
