Compliance June 3, 2004

House Bill Shields Employee Retirement Assets in Bankruptcy

March 18, 2003 (PLANSPONSOR.com) - A bankruptcy-reform measure working its way through the US House of Representatives includes protection for funds from withheld or contributed employee retirement payments from being paid out to other creditors in a corporate reorganization.
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The Bankruptcy Abuse and Consumer Protection Act (HR 975), sponsored by Representative James Sensenbrenner Jr., (R-Wisconsin) tries to better preserve workers’ retirement money by keeping creditors with a higher priority than participants from being able to dip into employee retirement assets to pay earlier claims, lawmakers say.

Lawmakers say the provision is designed to prevent reoccurrences of the Enron debacle during which many participants were left out in the cold in getting repaid for their retirement nest eggs because much of the company’s assets had been already disbursed to higher-priority creditors. Representative John Boehner (R-Ohio), chairman of the House Education & the Workforce Committee, publicly backed the Sensenbrenner bill in a letter to House colleagues.

The bankruptcy measure passed out of the House Judiciary Committee March 12 on an 18 to 11 tally. Sensenbrenner is committee chairman. According to Boehner’s letter, the Sensenbrenner bill is expected on the House floor this week.

At the same time, Boehner and Employer-Employee Relations Subcommittee Chairman Sam Johnson (R-Texas)  are sponsoring a sweeping pension reform bill, the Pension Security Act, which addresses a number of Enron and WorldCom-related pension abuses.  (See  Pension Security Act Heads for House Floor).The measure recently made it out of the Boehner committee and headed for the House floor  on a 29 to 19 vote.

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