Advice Approaches Separate Senate, House

July 29, 2002 ( - Congress may have squeezed in a couple of pension protections in the accounting reform bill, but the prospects for a broader solution seem murky at best.

While the House reached agreement on a version back in April (see Pension Protection Passes House ), the Senate is running out of time to reconcile two different pension reform bills.  And, in their current forms, either Senate proposal would still appear to require some fairly extensive negotiations to match up with the House version.

Earlier this month the Senate Finance Committee unanimously approved a bill, co-sponsored by Senators Max Baucus (D-Montana) and Charles Grassley (R-Iowa), which was designed to protect worker pensions from becoming another Enron. 

The pension bill, co-sponsored by Senators Max Baucus (D-Montana) and Charles Grassley (R-Iowa), is expected to reach the Senate floor in September.  It would allow workers to diversify investments, offer protection during blackout periods, provide additional diversification information to participants, and electronic notification when company insiders trade company stock. 

What both Senate bills share is the retention of the current ban on allowing those who manage plan assets from offering participants investment advice for a fee.

See You in September

Senate Democrats say they plan to take up the issue in early September after returning from an August break.  “If we want to get this done, this has to have the same priority that the corporate accountability act had this month,” Senate Majority Leader Tom Daschle (D-South Dakota), said Friday.

A bill sponsored by Senator Edward M. Kennedy (D-Massachusetts) is still alive, despite relatively controversial provisions that would essentially limit how much company stock workers could have in their 401(k) plans and require employee representation on company boards that oversee retirement plans (see Kennedy Introduces Democratic Pension Reform Bill ).  Many business leaders and most Republicans oppose those provisions.  However, they are not included in a version introduced and approved unanimously by the Senate Finance Committee earlier this month.

Splitting Differences

However, the real sticking point between the House and the Senate versions is the treatment of investment advice.  Unlike the Senate version, which essentially keeps in place a prohibition against investment management firms offering advice, the House version would permit such a change, albeit with some additional disclosure requirements.  Representative John Boehner (R-Ohio) has done a remarkable job of keeping his advice bill alive despite heated opposition.  In fact, when the bill passed the House in April, it garnered the support of 46 Democrats, including pension champion Representative Earl Pomeroy (D-North Dakota).  Meanwhile, Democrats in the Senate and opponents of the House approach, continue to express concerns about the implications of advice biased by the interests of the firms that manage the very funds on which counsel is provided.

Ultimately, the prospects for additional pension reform this year seem likely to hinge on the willingness of either side to compromise on – or set aside – a decision on investment advice.

On Friday Senate Majority Leader Tom Daschle (D-South Dakota) said he hoped Republicans would “come around on pension protection.”  In a news conference Daschle specifically cited expanding worker abilities to diversify their company stock investments, while also offering access to “unbiased financial advice” on managing those stock portfolios by exempting employers from liability only for such independent advice. 

According to BNA, Daschle confirmed that the Senate’s pension protection proposal would incorporate the “principles and language” of the bill passed by the Senate Finance Committee, as well as a more stringent measure approved by the Health, Education, Labor, and Pensions Committee in Senator Kennedy’s proposal.  BNA says there have been discussions about narrowing a provision in the committee-approved bill requiring employee representation on 401(k) plan boards for possible inclusion in the final product, citing a Senate Democratic aide.

“Representative” Representations

Supporting the need for employee representation on retirement plan boards, Democrats hauled out WorldCom employee Steve Vivien, who at Friday’s news conference said that he is heading for retirement with a “frozen pension and worthless stock. Electing employees to boards will bring about a lot more openness,” he said.

Those supporting the broadening of investment advice cite both more offerings, lower cost, and perhaps better advice for participants, as well as a greater willingness on the part of employers to make those tools available to workers.