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Employee Benefits Bulletin, April 2002

LEGISLATION UPDATE POST-ENRON PENSION REFORM

On April 11, 2002, the Republican-controlled House passed H.R. 3762 (the Pension Security Act of 2002) by a vote of 255 to 163. The Pension Security Act of 2002 is a combination of the Bush proposal, the Portman Bill, and the Boehner Bill. In a nutshell, the Pension Security Act of 2002 ("House Bill") allows employees to sell publicly-traded, employer-contributed company stock in their 401(k) plans after three years, allows plan administrators to give personalized investment advice, requires plans to give participants notice 30 days prior to an administrative blackout period, and prevents company executives from selling their employer stock during a blackout period.

The Democratically-controlled Senate's Health, Education, Labor and Pension Committee has reported out S.1992 (Protecting America's Pension Act of 2002 or "Senate Bill"), which is a significantly different pension bill. Most notably, the Senate Bill prohibits participant investment of deferrals in company stock if the company makes matching or nonelective contributions of employer stock, while the House Bill does not restrict participant investment in employer stock in any manner. Although this Senate Bill's restriction on employer stock falls short of an outright cap, the Senate Finance Committee has not yet voted on a bill. Proposed pension legislation probably will not be presented before the full Senate until after Memorial Day.

With the parties' split over the major reform issues and upcoming elections in November, Congressional debate over these proposed pension reforms promises to be very interesting. We will keep you informed of any news of compromise.

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