WASHINGTON - Acting on the first bill arising from the Enron scandal, the House approved a plan yesterday intended to provide greater protections for employee retirement savings.
The bill, passed by a vote of 255-163 and backed by President Bush, would make it easier for workers to diversify investments in their retirement accounts. It would also bar corporate executives from selling company stock at a time when ordinary workers could not.
"This is a pretty straightforward, common-sense piece of legislation," said Rep. Rob Portman, an Ohio Republican who was a chief sponsor of the bill. "It's not the silver bullet that's going to solve every problem in our pension system. But it makes substantial progress."
Bush issued a statement of support last night: "Employees need more information about their pension plans and more control over them. The reforms will give employees better access to investment advice ... and increased ability to diversify."
But most Democrats, including Rep. Benjamin L. Cardin of Baltimore, an original co-sponsor of the measure with Portman, complained that it had been so watered down by Republican leaders that it offered little improvement in the current system.
Worse, Cardin said, the measure takes a step backward by eliminating a current protection: It would allow the financial firms that manage corporate retirement plans to offer investment advice to employees.
Democrats argue that this creates a conflict of interest because the investment firms stand to gain commissions from the choices that workers make.
"I'm disappointed," the Baltimore Democrat told the House. "This is a missed opportunity to pass legislation that would have gone a long way toward helping the American worker."
Cardin said he was hopeful that the Democratic-led Senate would make changes in the legislation to allow him to vote for the final version.
Like Cardin, the three other Democrats from Maryland - Reps. Elijah E. Cummings of Baltimore, Steny H. Hoyer of Southern Maryland and Albert R. Wynn of Prince George's County - voted against the bill.
All four Maryland Republicans in the House - Reps. Robert L. Ehrlich Jr. of Baltimore County, Wayne T. Gilchrest of the Eastern Shore, Constance A. Morella of Montgomery County and Roscoe G. Bartlett of Western Maryland - voted for it.
Supporters said the measure was intended to restore investor confidence in retirement savings plan in the wake of the Enron disaster. Many Enron employees were heavily invested in company stock that became worthless as the energy trader collapsed last year.
Members of both parties said the Enron calamity had exposed flaws and loopholes in the federal laws that created the 401(k) retirement savings plans, in which 42 million Americans are now invested in hopes of supplementing Social Security.
The most glaring flaw that the bill seeks to correct was a provision that let executives sell their Enron stock as the company was on the brink of collapse, while thousands of workers were barred from doing so.
Under the bill, all workers would be given 30 days' notice any time access to their retirement accounts is to be blocked. And such "blackouts" would apply equally to executives and the rank and file.
The measure is also intended to persuade workers to spread their savings across a broad range of investments - to avoid the risk, Portman said, of having "all your eggs in one basket."
To encourage diversification, the bill would give workers new freedom to sell company stock that employers have contributed to their retirement funds. Many employers now offer only their own stock as their contribution to such funds. In some cases, workers cannot sell that stock until they reach age 50 - as was the rule at Enron - or until they retire.
Under the bill the House passed yesterday, employers would have to let workers sell company stock either after three years of employment or three years after they received the stock.
Cardin's original bill would have allowed those who had been employees for at least three years to sell company stock as soon as they received it. He argued that the other option was too complicated and would make it harder for workers to diversify by selling off some of their company stock.
But Rep. John A. Boehner, an Ohio Republican who pushed for changes in the Portman-Cardin bill, said it was important to give employers the option of imposing at least a three-year minimum on the holding period for company stock. Companies often rely upon this authority, Boehner said, to retain valued employees.
"We don't want to discourage companies from offering company stock," Boehner said.
To Cardin and other Democrats, the most objectionable change is the elimination of a rule that would have barred firms that manage retirement plans from also offering financial advice from which they could benefit.
Under the House measure, such advice could now be offered, so long as the savings plan administrators disclosed their financial interest.
This change, Cardin complained, would let savings plan managers recommend that workers choose investment options on the basis of how large a commission the plan manager would receive.
"I can't support creating a loophole like that," Cardin said.
Other Democrats pointed to Merrill Lynch & Co., which has been accused of dispensing advice that hurt its clients but made money for the company.
"This is the lesson of Enron," said Rep. George Miller, a California Democrat.
Under the House bill, workers would be free to seek additional financial advice from outside firms, paid for with pretax dollars deducted from their paychecks.
"If you really believe education is a part of a problem, then this is something that's going to address it directly," Portman said.
Democrats offered a substitute proposal. It would provide independent investment advice, include a worker representative on a corporate pension board, require that workers be notified when executives sell company stock and increase penalties for mismanagement of retirement savings plans.
But it was defeated by a vote of 232-182, cast largely along party lines.