Bush: 401(k) proposals are about 'fairness'
WHITE SULFUR SPRINGS, West Virginia (CNN) -- President Bush unveiled his proposals Friday to protect the retirement savings of American workers, telling attendees at a GOP retreat that his plans are fair, open and respectful.
"My plan will strengthen the worker's ability to manage their own retirement funds by giving them more freedom to diversify, better access to professional investment advice and quarterly information about their investments," the president said.
Bush's four-point plan, which requires congressional approval, also seeks to create parity between top executives and rank-and-file employees in handling their investments. It comes in the wake of the collapse of energy giant Enron Corp., which saw many of its employees lose their retirement savings as the company stock plunged to less than $1 a share.
"This is a matter of fairness," Bush said. "It is a matter of openness. It is a matter of respect for the process."
But the president's proposal could face an uphill battle in Congress. Shortly after Bush pitched his idea before fellow Republicans, Senate Majority Leader Tom Daschle, D-South Dakota, issued a statement saying Bush's plan "would do little, if anything, to restore public confidence in the private pension system."
"While it is encouraging that the administration now seems to recognize a need for government action in this area, the administration's proposal actually addresses only a small part of the problem -- and does that inadequately," Daschle said.
In addition, the Senate leader said the proposal opens up the pontential for new conflicts of interest "by allowing investment advisors to steer people into investments in which the advisors may have a financial stake. This could compound, rather than reduce, the risks now faced by workers and investors."
Daschle said Democrats would be introducing their own set of proposals on Capitol Hill.
The Enron collapse sparked a national debate about the security of employees' retirement savings, as many Enron employees lost the bulk of their savings when the company filed for bankruptcy. However, analysts pointed out that the Bush proposals, had they been in effect, would have had little effect on the Enron situation.
Bush's plan would allow employees to sell stock in their own company after participating in a 401(k) plan for three years and stipulates that senior company executives may not sell their company stock during a period when employees are barred from doing so.
But Enron employees were in fact free to sell all but 11 percent of their Enron stock at any time before age 55. The remaining 11 percent was Enron's employer "match" to employee contributions.
In the latter stages of the collapse, employees were barred from selling Enron stock for a brief period -- but by that time the price had already fallen from a high of around $90 to just over $13. And, a CNN-sponsored investigation revealed evidence that only one Enron executive disposed of a significant amount of stock during the lockdown.
Additionally, Bush's proposals would have company executives undertake responsibility for the employee's investments during such "blackout periods" when workers are not permitted to sell, and require a 30-day notice before such a blackout period can begin.
In his State of the Union address Tuesday, the president also called for "stricter accounting standards and tougher disclosure requirements" to make corporate American "more accountable" to employees and shareholders.
Speaking on CNN Friday morning, Labor Secretary Elaine Chao said the president had appointed a separate task force to review the accounting standards issues.
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