The proposal was in response to the unraveling of Houston energy trader Enron, which collapsed into financial rubble and, by doing so, heavily damaged the retirement nest eggs of many workers who had loaded up on Enron shares.
Regulators complained that some workers were not allowed to sell the stock when they wanted.
“There is no excuse for telling employees ‘you can’t sell the stock,’ said Massachusetts Secretary of State William Galvin, author of the bill. The law would give workers “the absolute right to sell company stock in their 401(k),’ Galvin said.
The proposed Massachusetts law states, that “it is unlawful for any employer, in connection with an employee benefit plan or pension account to which employees may contribute, to prevent or restrict an employee, benefit plan, or pension account from selling or otherwise divesting itself of the securities of the employer.’
The issue arose when participants charged they were improperly locked out of the plan from October 26 to November 19. An Enron spokeswoman told Reuters that the blocked access was part of a pre-planned change in plan administration.
The law proposed Tuesday would cover profit sharing, employee stock ownership, and pre-ERISA money-purchase pension plans at Massachusetts companies.
ERISA Trump Card?
One expert in employee stock ownership said it was not clear what impact state legislation would have, since ERISA, the federal law that governs 401(k) plans, usually supersedes state laws.
“Generally ERISA trumps state law and there would be a legal question about what effect such a law could have,’ said Corey Rosen of the National Center for Employee Ownership.