Senators Barbara Boxer (D-California) and Jon Corzine (D-New Jersey) have dusted off Boxer’s earlier proposals for limiting company stock investment by employees and are now proposing that employees be limited to having 20% of their 401(k) account in a single stock. Roughly 2/3 of the Enron 401(k) plan had been invested in Enron stock, according to the senators.
Following testimony before the Senate Commerce Committee from Enron workers earlier in the day, Boxer also called for a thorough investigation of the events leading to the energy trader’s collapse. “I personally hope some of these people wind up in jail,” she told a press conference following the hearings.
Plans could only restrict matching contributions to an employer stock investment for 90 days under the Boxer/Corzine proposal ? and the bill would cut the existing employer deduction for matching contributions made in employer stock in half.
Representative Ken Bentsen (D-Texas) plans to introduce a bill that would ban lockdowns of 401(k) accounts and employee stock ownership plans (ESOPs) without an exemption from the Department of Labor (DOL). According to the Houston Chronicle, before approving such a freeze, the DOL would have to determine that the blackout is administratively feasible ? and in the best interest of the plan, its participants and their beneficiaries.
The proposed law also would require employees to be given at least 90 days notice of a pending lockdown.
Bentsen’s bill also orders the Labor Department to work with the Treasury Department and the Securities and Exchange Commission (SEC) to determine if caps should be placed on how much company stock employees can purchase through their retirement savings plan.
Enron employees told the Senate committee that the so-called “black out” period in their 401(k) plan ran from mid-October till mid-November, rather than the 10 days asserted by Enron officials last week. Enron claimed that the blackout was associated with a recordkeeping conversion that had been long-planned and communicated to participants well in advance. The drop in stock price during that period was much less than the damages alleged in several of the pending participant lawsuits.
However, at a time when individual 401(k) accounts were plummeting, Enron executives allegedly cashed out more than $1 billion in stock options. Additionally, some 600 employees deemed critical to Enron’s operations received more than $100 million in bonuses last month as an incentive to hang around during failed merger talks with Dynegy.
Enron Chairman and CEO Kenneth Lay declined an invitation to testify before the panel ? but has agreed to attend a February 4 hearing of the Senate Commerce Committee. Former Enron CEO Jeffrey Skilling and Andrew Fastow, the company’s former chief financial officer, have also been invited to testify at that hearing.