House OKs Advice Bill

May 14, 2003 ( - The House of Representatives has approved a bill that would lower legal barriers that bar investment firms from offering participants financial advice for a fee, as well as adding some new protections, including the ability to diversify company stock investments (after a period).

>The Pension Security Act (HR 1000) passed by a vote of 271-157, garnering the support of  49 Democrats. The bill, co-authored by Representatives John Boehner (R-Ohio) and Sam Johnson (R-Texas), is largely identical to the version that passed the House last April by a margin of 255-163 (see  Pension Protection Passes House ), and has President Bush’s support.  Among the 49 Democratic supporters were  Reps. Baron Hill (D-Indiana), Martin Frost (D-Texas), David Wu (D-Oregon), Ron Kind (D-Wisconsin), Carolyn McCarthy (D-New York),  Rush Holt (D-New Jersey), Cal Dooley (D-California), Jane Harman (D-California), Richard Neal (D-Massachusetts), Ellen Tauscher (D-California), and Martin Sabo (D-Minnesota).  Delegate Eleanor Holmes Norton (D-DC) is an original co-sponsor of the bill.

>The bill has a number of outspoken opponents, including Representative Rob Andrews, (D-New Jersey), who said, “If you liked the Enron scandal, if you liked the WorldCom scandal, you’ll love what will happen to pensions if this bill becomes law.”  Representative George Miller (D-California), said “In the wake of the worst pension scandals in recent history, the response of the Republican congressional leadership is ‘see no evil, hear no evil, and do no good.”

>Supporters of the measure say conflicts of interest would be avoided because the bill holds personally liable any investment advisers who breach their legal obligations. Those providing advice must disclose in plain language any fees or potential conflicts. Employers that do not provide the advice are shielded from lawsuits resulting from such guidance. Also, the bill provides a tax deduction to workers who prefer to seek their own advice.  “Our goal here is to get real investment advice into the hands of everyday working people,” said Representative Boehner.

>The Pension Security Act would require advice providers to disclose in plain language any fees or potential conflicts, and the bill includes a new addition from Representative Rob Portman (R-Ohio) that would allow workers purchase their own investment advice with pretax dollars (see  Unfinished Business, Regulatory Relief Top Portman/Cardin Bill ). 

>Democrats offered their own pension proposal, but lacked the votes to pass it. Their plan would have required executive pensions and stock options to be subject to the same rules that apply to their workers’ plans, and would have required employers that convert traditional pension plans to cash balance plans to let their workers choose between the two options (see  Sanders, Miller Team For Cash Balance “Choice” ).  They also were unable to kill Boehner’s bill by sending it back to committee.Plan sponsors shouldn’t count on new legislation any time soon, however.  The most controversial aspect of the bill is the advice component, and while Representative Boehner has managed to get some version of the legislation through the House three times now, getting a comparable package through the Senate has proven to be the real challenge (see  Party Lines Drawn In Pension Proposals ). 

>And this time doesn’t appear to be any different.