Senate Negotiators Make Progress on Pension Reform

Negotiators are reportedly close to an agreement on a pension reform bill that will merge versions passed by the Senate Finance Committee and Senate Health, Education, Labor, and Pensions (HELP) committee. The bill will look mostly like the Finance committee version, with a few provisions from the HELP bill. That means it could be fairly close to the House version on most issues, including providing a requirement that employees in 401(k) plans be able to diversify after three years in the plan or, possibly, after employer stock has been in their account for three years. Stand-alone ESOPs would not be affected by either bill; only ESOPs combined with 401(k) plans in public companies or public company ESOPs that allow employees to buy stock in the plan would likely see any change in rules. Congressional passage of the legislation seems increasingly uncertain, however, and very unlikely before a planned October recess. That means the bill would only pass in a "lame-duck" session after the elections.

Major obstacles to passage come in several forms. First, Congress has to pass homeland security legislation and a resolution on Iraq. The first has taken much longer than expected. Second, the Senate and House versions contain very different provisions on providing employers with exemptions from liability when providing investment advice to employees. Finally, the Senate bill may become a magnet for a variety of other controversial tax proposals, such as small business tax incentives, as well as an effort to raise the minimum wage.