The move clears the way for Chao to appoint an outside official to run the plans as a fiduciary while Enron wends its way through the legal system and the myriad of allegations against it – including many about the plans’ operations – can be investigated.
“The department is transferring control over the retirement plans to an independent expert who can aggressively protect workers’ interests during corporate bankruptcy proceedings and maximize the likelihood of recovering funds for the plans,” said Chao, in a Department of Labor statement issued Tuesday.
Enron sponsors a 401(k) savings plan, a cash balance defined benefit plan, and an employee stock ownership plan covering over 20,000 employees.
The DOL had been negotiating with Enron lawyers for about a month on the change, according to reports on Sunday.
The independent fiduciary will control:
- Operating the plans and investing plan assets
- Selecting and monitoring investment managers
- Investing plan assets currently held in employer securities
- Selecting and monitoring funds offered as plan investments
- Implementing procedures relating to pass-through voting of employer securities
- Retaining professional services, such as outside legal or accounting.
Under an agreement which Chao announced Tuesday, Enron will pay the new official’s fees for up to three years to a maximum of $1.5 million per year plus expenses. The DoL will pick the new official.
The beleaguered Houston energy trader, which filed for federal bankruptcy protection December 2, has been the subject of numerous lawsuits from, among others, employees who claimed they were improperly pressured to buy Enron stock when its value was plummeting. Many former Enron employees say they lost their entire retirement savings.
In recent weeks, Enron’s handling of its retirement plans as well as its riskier business practices have been the subject of a flurry of legislative proposal from a growing list of members of Congress – particularly about potential limits on company stock investments.
Investigative committees have recently begun hearing testimony from current and former Enron executives about the company’s collapse.