Kennedy Introduces Retirement Bill

Senator Edward Kennedy has introduced legislation that is expected to serve as the retirement law focus for Senate Democrats. The bill is expected to be marked up favorably by the Senate Labor Committee, but its prospects on the floor of the Senate are more uncertain. The House is expected to pass less stringent legislation more along the lines of the Administration's proposals. Industry groups, however, have pledged to fight both bills.

Kennedy's bill, S. 19292, is titled the "Protecting America's Pension Act of 2002." Its principal provisions affecting employee ownership are:

Diversification Rules

• Rules in this section of the bill apply to 401(k) plans and combined ESOP/401(k) plans in public companies, but not to stand-alone ESOPs or ESOP or 401(k) plans in closely held companies.
• Employers could contribute company stock to a 401(k) plan or combined ESOP/401(k) plan (KSOP), or employees could buy stock through the plan, but not both.
• Employees could diversify their own deferrals immediately; employer contributions on employer stock could be diversified after the stock had been in the plan three years.
• The Secretary of Labor is instructed to make recommendations on what to do about employer stock in 401(k) plans in closely held companies.

Worker Rights

• Rules would be tightened for providing misleading information on company stock or failing to provide material information on company stock; executive sales would have to be disclosed.
• In plans with more than 100 participants, employees would have to be able to elect half the trustees of the plan, with a neutral party breaking ties.
• Workers would receive a 30-day notification of "lockdowns."
• Adequate fiduciary insurance would be required.

Worker Education

• Companies would be allowed to hire qualified independent financial advisers to provide advice on retirement planning without subjecting the advisers to fiduciary liability.
• Employers would be required to provide information about benefits of diversification.
• The definition of fiduciaries who could be sued would be expanded to anyone who participates in a breach of fiduciary responsibility or conceals facts that lead to a breach.