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The Employee Ownership Update

Corey Rosen

March 21, 2002

(Corey Rosen)

House and Senate Committees Pass Retirement Reform Bill

Two House committees and one Senate committee have now passed retirement reform proposals. The House Education and the Workforce Committee and the House Ways and Means Committee bills generally follow the outlines of President Bush's proposals. Both exclude stand-alone ESOPs and ESOPs in closely held companies. The Senate Health, Education, Labor, and Pensions Committee bill is much more restrictive. It also excludes stand-alone and private company ESOPs for all of its provisions except one requiring employees to be able to elect half of the trustees of a defined contribution plan with more than 100 participants. The Senate Finance Committee still must mark up its own bill; it is expected to be similar to the version passed out of the Labor Committee. Committee bills are likely to survive on the floor of each body relatively intact, although Republicans have some chance of modifying the Senate bill. The substantial differences in the two versions will then need to be worked out in conference.

The principal provisions affecting issues of direct concern to the employee ownership community are outlined below. Additional issues focusing on strictly 401(k) issues can be found in the full text of the bills at

House Ways and Means

The committee voted 36-2 to pass H.R. 3669, an amended version of legislation introduced by Rob Portman (R-OH) and Benjamin Cardin (D-MD) The proposal exempts stand-alone ESOPs, defined as ESOPs not formally or operationally linked to a 401(k) plan.

House Committee on Education and the Workforce

H.R. 3762, the Pension Security Act of 2002, is very similar to the Ways and Means Committee bill, although not as strong. It passed 26-19 with just two Democrats supporting it. It differs from the Ways and Means Committee in two primary ways:

Senate Health, Education, Labor, and Pensions Committee

Passed on a party line vote, S. 1992, the "Protecting America's Pensions Act of 2002," is much stronger than either House bill. Its main provisions include:


Diversification Rules

Worker Rights

Worker Education in 401(k) Plans


The Senate Committee bill may be modified somewhat by the full Senate; the House bill is likely to compromise between the two committee versions, but not add strengthening amendments. The President is likely to oppose many of the Senate bill's provisions. Most people expect some compromise version to pass, although some observers think the issue may not be resolved this Congress. Assuming it is, however, something along the lines of the House Ways and Means Committee's diversification proposals look like a probable compromise, with perhaps stronger notification and education provisions along the Senate bill lines being added. The proposal for employees electing trustees is a long shot, and chances are only somewhat better for restricting employee investments in stock if employers match in stock.

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