Bush interjected a statement on pension security when addressing the economy. “A good job should lead to security in retirement. I ask Congress to enact new safeguards for 401(k) and pension plans. Employees who have worked hard and saved all their lives should not have to risk losing everything if their company fails. Through stricter accounting standards and tougher disclosure requirements, corporate America must be made more accountable to employees and shareholders and held to the highest standards of conduct.”
Mark Ugoretz, president of the Erisa Industry Committee, says he agrees with the president on enacting stricter corporate governance rules but he does not see legislation as the solution.
“It seemed that he had the two reversed, if the issue (of pension security) is generated by the Enron case, then corporate governance issues should be dealt with before we rush to legislation.”
“The allegation at Enron is that as a result of manipulation or improper behavior participants lost the assets in their 401(k) plans,” he continued. “The problem with most of the bills being introduced today is that they fail to strike any kind of balance between an employer’s need to build an alliance between the employee and business purpose which is the reason employers supply stock in the first place.”
“Also, they fail to recognize that a significant amount of employees have done very well and have beaten the 401(k) average by significant margins by investing in company stock,” he added. “So that the caps on investing in company stock being promoted would severely punish a significant number 401(k) participants.”
Day in Court
Ed Ferrigno, the Washington representative of the Profit Sharing Council of America, shared Ugoretz’s sentiment but said that at least 401(k) investors are getting their day in court.
“Employees have to understand their responsibilities to take charge of their 401(k) investment decisions within the structure of their plan, ” he said. “That includes diversifying as they approach retirement and insuring that they are not relying on equity investments as sources of immediate retirement income. That’s part of the education challenge for the system. As long as one participant doesn’t understand this, we still have work to do.”