Washington, D.C. – U.S. Senator Mike Enzi, R-Wyo., said a provision designed to protect workers from overinvestment in company stock would only hurt the very people it is supposed to protect.

Enzi offered an amendment today to strike a provision in the Protecting America's Pensions Act (PAPA), S. 1992, that would prohibit employers from offering stock as a 401 (K) investment option if an employer also makes matching contributions in company stock. Enzi's amendment was defeated by a 10-11 vote in a meeting of the Senate Health, Education, Labor and Pensions (HELP) Committee.

Enzi argued that the provision, introduced by Senator Ted Kennedy, would not provide protection for workers but would only serve to limit employee investment choice and opportunity.

"Pension reform should be addressed by giving employees the right to diversify and the information and advice to make sound choices. Employees are in the best position to make investment choices and with the right tools will make decisions that work for them," said Enzi.

Enzi also said he was particularly concerned about the impact of the provision on small businesses and their employees.

Enzi's statement follows:

Sen. Michael B. Enzi
HELP Committee Mark Up
S. 1992 "Protecting America's Pension Act"

March 20, 2002

Thank you Mr. Chairman, for holding this executive session. I appreciate that you moved the date of this session in an effort to accommodate our request to review this legislation more thoroughly.

We are here to consider legislation proposed in the wake of the collapse of Enron Corporation. I am immediately struck by the title of the bill and its acronym. The "Protecting America's Pensions Act", or "PAPA", is an excellent example of federal legislation that would significantly harm the very people it purports to "protect".

I've often found it to be the case that if something is worth reacting to, it's worth over-reacting to. No doubt, the collapse of Enron, has raised some serious questions about our private pension system. A targeted and appropriate legislative response to the lessons of Enron is warranted. What is not warranted is using the Enron debacle as a springboard to enacting sweeping legislation that will undermine our employer-sponsored pension system.

42 million Americans are covered by 401(k) plans. These employees have accumulated an estimated $1.7 trillion in assets in their retirement savings accounts. 401(k) plans have not only created wealth for many individual participants, they have also served as and engine of economic growth by providing one of our most significant sources of investment capital. Unfortunately, the "Protecting America's Pensions Act" would chill this.

Federal legislation to strengthen America's pensions must preserve, not harm, worker choice and opportunity.

The 42 million participants in 401(k) plans do not all have the same needs in a retirement plan. The cornerstone of the 401(k) system has been the worker's freedom and flexibility to make retirement investment decisions best-suited to his or her needs.

Senator Kennedy's bill takes the approach that employees cannot or should not be trusted to make sound choices regarding company stock investments. I believe that instead of us making the decision for workers, we should be empowering them to make their own decisions, best suited to their needs.

Federal legislation to strengthen America's pensions must promote, not stifle, employee ownership.

Yet, Section 102 of Senator Kennedy's bill prohibits employers from offering company stock as a 401(k) investment option if the employer also makes matching contributions in company stock.

Federal legislation to strengthen America's pensions must be attuned to the impact on small businesses and workers.

When small companies do offer retirement plans, almost all of those plans, about 93%, are defined contribution plans, such as 401(k)'s. When I look at this statistic, along with the major reasons why small businesses do not offer retirement plans, I see that S. 1992 will have a devastating impact on the sponsorship of retirement plans by small businesses. -more-

S. 1992 will make changes to the rules governing 401(k) plans that will exacerbate the major reasons why small businesses do not offer retirement plans. The bill will increase the expense of contributions if companies are no longer able to match in company stock instead of cash. The legislation will also raise the administrative expense and regulatory burden of sponsoring defined contribution plans. Joint-trusteeship requirements and increased liability provisions are just two examples.

This runs counter to Congressional action over the last 25 years to encourage the sponsorship of retirement plans by small businesses. Most recently, the Economic Growth and Tax Relief Reconciliation Act of 2001 authorized a refundable tax credit for small employers to offset some of the administrative costs of establishing a new retirement plan.

But just one year later, the "Protecting America's Pensions Act" would undermine Congress's prior efforts to increase small business sponsorship of retirement plans. The bill would also undermine prior Congressional efforts to expand employee ownership as a means of democratizing corporate ownership. It would also undermine employee opportunity and choice.

But we have an opportunity and a choice. We have an opportunity to enact pension reform legislation that is responsive to the lessons of Enron and strengthen America's pension system. We have a choice here today whether or not to support pension reform that will ultimately harm the workers it purports to protect - and the American economy. My choice is simple. I choose America's workers and America's economy over such mis-targeted legislation.

Thank you Mr. Chairman