Not surprisingly, Enron – and the circumstances surrounding its descent into bankruptcy along with the retirement savings of its workers – will loom large, at least initially as various committees and subcommittees conduct their investigations. In that context, the issue of 401(k) diversification – or lack thereof – will likely engender continued discussion on the Hill.
What’s not clear is if those discussions will actually be transformed into legislation that will impact plan sponsors or participants. According to panel participants at the ABA Retirement Services Conference in Washington, DC, Republicans in the House of Representatives are concerned about “the Enron issue” – but also want to avoid hurting a private pension system that largely works.
One panelist suggested that the concerns about the lack of diversification in the Enron situation might actually provide incentives for support of measures, such as the Boehner bill, that would broaden the availability of participant advice. Still, as important as diversification is, the issue is the ‘right’ of employees to diversify, according to one staff member.
No Quick Fix
Defined benefit plan sponsors holding out hope for a “quick fix” to the replacement benchmark for the 30-year Treasury in pension calculations are likely to be disappointed. Despite getting close to a short-term solution in the last session, the beginning of a new year will likely mean a focus on a more lasting solution, rather than a short-term ‘fix.’
And that analysis will likely proceed with an eye toward avoiding a negative impact on employees impacted by the lump sum calculations, as well as the employers struggling to ensure adequate funding of the plan’s obligations.
A key item for the Senate Finance Committee will be the current lack of coverage by the private pension system, as evidenced by the December report from the Bureau of Labor Statistics (BLS). Representative Robert Andrews (D-New Jersey) has commissioned a study by the General Accounting Office (GAO) on where workers are in terms of planning for retirement.
Congress will also be keeping an eye out for the impact of the Economic Growth and Tax Relief Act (EGTRRA) on participation rates – and several key members are ‘hopeful’ that employers will begin to do more to education non- or low participation workers about the new retirement savings incentives such as the low-income tax credit.