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House Passes Pension Security Act

Ryan Votes for Bill that Gives Employees Freedom to Diversify, Improves Access to Quality Investment Advice 

WASHINGTON – First District Congressman Paul Ryan today voted in favor of legislation that gives workers new retirement security protections and builds on positive steps taken in last year’s corporate accountability law.  This measure – the Pension Security Act of 2003, H.R. 1000 – passed the House of Representatives by a vote of 271-157.  If enacted, the bill will empower employees and help protect them from losses like those suffered by Enron employees when their company’s stock plummeted. 

“This bill will ensure employees have more information, better access to investment advice and that they are able to reduce risk by diversifying,” Ryan said.  “Along with the corporate responsibility law we passed last year, this will guard against future Enron scenarios and protect workers’ retirement savings.  If a company fails, that shouldn’t mean its workers lose their life’s savings.  This legislation will help employees avoid such devastating losses.”

Key provisions of this legislation include the following:

New Diversification Rights

H.R. 1000 gives employees the right to diversify out of company stock: (1) after 3 years of service with the company or (2) after 3 years of holding the stock in their 401(k) plan.  The bill prohibits employers from requiring employees to invest their own pension contributions in company stock.  A 5-year transition rule applies to company stock that is already in the account when the new rules are enacted.  Private plans and pure ESOPs (i.e., ESOPs that do not hold any 401(k) money) are not affected by the new rules.

Disclosure and Investment Education

H.R. 1000 requires employers to provide employees in private-sector pension plans with quarterly benefit statements informing them of the value of their accrued benefits, the value of their investments (including the amount invested in company stock), and any restrictions on the employee’s rights to change investments.  The bill also requires employers to provide employees with investment education notices.  The notices are required quarterly for workers in private-sector plans and annually for workers in plans of governmental or tax-exempt organizations.

Access to Retirement Planning Services

H.R. 1000 allows employers to provide workers with direct access to professional investment advice related to employees’ choices of retirement investments, as long as the advisers disclose any fees or potential conflicts of interest.  Under current law, employers may not provide retirement-plan participants with direct access to fiduciary advisers for individual investment advice.  In addition, employees would be allowed to use pre-tax dollars to purchase retirement planning services (including investment advice) from an outside adviser.

Clarifies Fiduciary Protections

H.R. 1000 clarifies that employers are liable for pension plan losses during a blackout if there is a breach of fiduciary duty.

Pension Reform and Simplification

H.R. 1000 includes several provisions designed to make it easier for small businesses to start and maintain defined benefit pension plans.  For example, it simplifies reporting requirements for pension plans with fewer than 25 participants.  In addition, it reduces Pension Benefit Guaranty Corporation (PBGC) insurance premiums for small and new pension plans.

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