Retirement Reform Bill Passes House

The House has passed H.R. 1000, the Pension Security Act of 2003. The bill would exclude all ESOPs from its requirements except ESOPs in public companies that are combined with 401(k) plans or that allow employees to buy stock through deferrals into the plan. For these plans, as well as for 401(k) plans:

• Employees would have to be able to sell employer stock contributed by employers after it had been in their accounts for three years or the workers had been in the plan for three years (at the company's choice).
• Stock purchased by employees could be diversified immediately, subject to rules for periodic trading requirements in the plan.
• Companies could not require that employees invest in company stock.
• Companies would have to provide quarterly account statements, including statements concerning the virtues of diversification.
• For companies with stock already in the plan, the rules would phase in at 20% of the assets in company stock per year.

Other provisions in the bill would provide fiduciary exemptions for advice to employees from companies operating the 401(k) plan, as well as outside advisors. It would also allow companies to apply to the Secretary of Labor to test their defined contribution plans for discrimination based on a "facts and circumstances" exemption from normal eligibility rules.

The Senate has yet to move on pension reform, even at the committee level, making prospects for the legislation uncertain this year.