Partisan sniping, and compromise, on pension reform

Pension reform has become a partisan issue.

Almost every other day, Republican spokesmen send the press e-mails accusing the Democratic-controlled Senate of delay in dealing with a pension-protection bill proposed by President Bush and passed by the House April 11.

Last Thursday, for instance, a Republican missive charged Senate Democratic leaders of "leaving town until after Labor Day without passing legislation to protect workers from losing their retirement savings in Enron-style corporate meltdowns."

True. Senate Majority Leader Thomas Daschle announced later that day that pension reform would be debated by the Senate in September.

But the Senate bill will be much tougher than that which easily slipped through the House with the support of 46 Democrats.

One reason for delay was a backup in the Senate calendar. Republicans in that chamber held up action on other legislation dealing with, for instance, campaign reform, says a spokesman for Sen. Edward Kennedy (D) of Massachusetts.

Senator Kennedy has introduced a bill that gets rave reviews from advocates of reform for 401(k) plans, the type of retirement savings that were devastated in the scandals.

Frank Toohey, a lobbyist in Washington for the AARP, with its 35 million senior members, calls the House bill "weak and ineffectual," and adds that the Kennedy bill would provide "meaningful pension reform."

The House bill "would do very little to prevent a future Enron and almost nothing to stop a WorldCom situation," charges Karen Ferguson, director of the Pension Rights Center in Washington.

Another cause for delay may have been a division among Senate Democrats. The Senate Finance Committee, under Senator Max Baucus of Montana, drafted a pension bill that reformers considered only "a bit better" than the House bill. A compromise Democratic bill was announced Thursday.

The pension issue could become a prominent issue in the fall election.

When signing the corporate-responsibility bill last week, Mr. Bush called on Congress "to protect the savings and investments of Americans preparing for retirement."

The bill he has just signed requires companies to give employees 30 days' notice should they change 401(k) managers and freeze employee accounts while that switch takes place. Executives would not be able to sell company stock during that blackout period, as Enron executives did while employees were stuck.

The same day, Democratic National Committee Chairman Terry McAuliffe promised: "The Democrats will ensure greater retirement security by reforming the pension system."

Perhaps he had read a strategy memo last week from a top Democratic consulting firm, Democracy Corp., which listed pension reform as one of four new fronts where the Republicans are "in a weaker position."

At a Wall Street demonstration of union workers last Tuesday, AFL-CIO President John Sweeney piled on, presenting former employees from Enron, Arthur Andersen, and WorldCom to tell their sad stories of lost pension money.

The House bill allows employers to provide their workers with professional advice for managing their 401(k) plan as an employee benefit. It would require plan managers to give workers information on their accounts on a quarterly basis.

Employees could get out of company stock in their plans 20 percent per year for five years after the bill becomes effective. Any new company stock could be dumped after three years.

To reformers and Democrats, these provisions aren't enough.

The Senate Democratic bill allows workers to diversify out of company stock after working for the company just three years.

The original Kennedy bill aimed at portfolio diversification by requiring employers to choose between making 401(k) matching contributions in company stock or offering company stock as an investment option for the employee. This was dropped.

Also left out was a provision giving workers a representative on the board of pension plans.

The Senate bill also requires firms to inform workers when executives sell their company stock. Workers must be given access to "unbiased investment advice," probably ruling out plan managers and making them unhappy. Plans overconcentrated in company stock would need insurance against corporate wrongdoing.

Opponents of provisions in the Democratic compromise say the requirements are too expensive. They will discourage companies from setting up new 401(k) plans or encourage firms to end them.

Observers suspect some compromise between the Senate Democratic bill and the House bill will reach the president's desk. Reformers hope public annoyance at the impact of scandals will get a tough bill through the process.