For Immediate Release
Office of the Press Secretary
February 1, 2002
President Bush Calls for Action to Protect American Workers' Retirement
"A good job should lead to security in retirement. I ask Congress to enact new safeguards for 401(k) and pension plans. Employees who have worked hard and saved all their lives should not have to risk losing everything if their company fails."
President George W. Bush
State of the Union Address
January 29, 2002
THIS WEEK'S PRESIDENTIAL ACTION
In his State of the Union Address, President George W. Bush called on Congress to enact important new safeguards to protect the pensions of millions of American workers. The President called on Congress to move quickly to enact these important reforms so that people who work hard and save for their retirement can have full confidence in our retirement system.
Today, President Bush announced that he has approved the recommendations of a Cabinet-level Task Force on Retirement Security, which has made specific recommendations for legislative action to better protect workers pensions. The Bush Administration will be working with Congress on a bipartisan basis to ensure that these reforms become law.
BACKGROUND ON THE PRESIDENTS ACTION TO:
About 42 million American workers own 401(k) accounts with a total of $2.0 trillion in assets. These workers need to have full confidence in the security of their pension plans.
Under current law, companies can force workers to hold company stock in their 401(k) plans for extended periods of time. Workers also may not receive adequate advance notice of so-called blackout periods times when employers change pension plan features or administrators, during which workers cannot control their retirement savings accounts. And, too many workers lack access to investment advice and useful information on the status of their retirement savings.
To address these problems, President Bush created a Task Force on Retirement Security -- comprised of Treasury Secretary Paul ONeill, Labor Secretary Elaine Chao, and Commerce Secretary Don Evans on January 10. The Task Force was charged with developing new safeguards to protect the pensions of American workers.
President Bush today is announcing a four point pension protection proposal that will: (1) provide workers greater freedom to diversify and manage their own retirement funds; (2) ensure that senior corporate executives are held to the same restrictions as average American workers during blackout periods and that employers assume full fiduciary responsibility during these times; (3) give workers quarterly information about their investments and rights to diversify them; and (4) expand workers access to investment advice.
Giving Workers Freedom To Diversify: Employers should be encouraged to make generous contributions to workers 401(k) plans, including the option to use company stock to make matching contributions. However, workers must be free to choose how to invest their retirement savings. The Presidents proposal will ensure that workers can sell company stock and diversify into other investment options after they have participated in the 401(k) plan for three years. While many companies already allow rapid diversification, others impose holding periods which can last for decades.
Creating Parity Between Senior Corporate Executives and Rank-and-File Workers: President Bush believes it is unfair for workers to be denied the ability to sell company stock in their 401(k) accounts during blackout periods while corporate officers face no similar restrictions on selling stock held outside the 401(k).
The President has directed the Task Force to develop appropriate policies that would preclude senior corporate executives from selling company stock during times when workers are unable to trade in their 401(k) plans.
The Task Force recommendations will clarify that employers have a fiduciary responsibility for workers investments during a blackout period. Under current law, when 401(k) plans are controlled by workers, employers are not responsible for the results of workers investment decisions. This safe harbor from liability will no longer apply during a blackout period. During these times, employers will be responsible for the consequences of the workers inability to independently control their investments if they violated their duty to act in the interests of the workers when they created the blackout period.
Giving Workers Better Information About Their Pensions: The President proposes to increase worker notification of blackout periods and provide workers with quarterly benefits statements about their individual pension accounts.
To ensure that blackout periods are fair, responsible and transparent, the Presidents proposal will ensure that workers have ample opportunity to make investment changes through a requirement that they be given a 30-day notice before any blackout period begins.
To enable workers to make independent, informed decisions, employers will be required to give workers quarterly benefit statements that include information about their individual accounts, including the value of their assets, their rights to diversify, and the importance of maintaining a diversified portfolio. The Secretary of Labor will be given authority to tailor this requirement to the needs of small plans. Under current law employers are only required to make statements available to workers on an annual basis.
Expanding Workers Access to Investment Advice: The President calls on the Senate to pass the Retirement Security Advice Act which passed the House with an overwhelming bipartisan majority. This legislation encourages employers to make investment advice available to workers and allows qualified financial advisors to offer investment advice only if they agree to act solely in the interests of the workers they advise.