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CNN Live At Daybreak

Bush To Seek Revamping of Pension Laws

Aired February 01, 2002 - 05:14   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: President Bush will announce steps today meant to safeguard workers' 401(k) retirement plans. Mr. Bush is expected to ask Congress to revamp pension laws so workers can diversify retirement accounts heavy with company stock. This comes in the wake of Enron's bankruptcy, which cost many workers their life savings. Many sad stories there.

Many Enron employees, of course, lost the money in their 401(k)s because they were prevented from selling company stock for weeks. The issue of how long a company can require employees to hold stock is a hot topic on Capitol Hill, like you just heard.

CNN's Kitty Pilgrim has more.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Owning a piece of the company store used to be considered a perk. Now for some employees of bankrupt companies, a liability. At issue, the lockdown period, the duration of time where employees are restricted from making changes to their 401(k) plans. Lockdown periods are common when companies change retirement administrators. Twenty-four thousand retirement plans did so last year, about seven percent.

Lockdowns can last for a few days to a few months. There is no law to regulate how long a lockdown can last. The U.S. Labor Department is investigating if Enron's lockdown was legitimate or timed to prevent employees from bailing out of the stock.

Enron employees asked a U.S. bankruptcy court to continue their billion dollar lawsuit against the company. The suit claims Enron did not act responsibly in managing employees' 401(k) plans, a lawsuit that has some merit, according to legal experts.

BRIAN O'HARE, PATTERSON, BELKNAP, WEBB & TYLER: But if Enron put that blackout period knowing that their stock was in trouble or going down, that would be a fiduciary problem.

PILGRIM: The Enron debacle also brings up the debate of how much stock an employee should own. At Enron, 58 percent of 401(k) assets were in Enron's stock, a far cry from the standard investment advice that cautions against more than five percent of portfolios held in any one stock. Reform proposals tackle this issue. KAREN FRIEDMAN, PENSION RIGHTS CENTER: One type of legislation that is out there is the Boxer-Corzine legislation that would basically restrict how much of employees' money can be put into employer stock in a 401(k) plan and to ensure that as an employer puts all of the matching contributions into employers' stock, that employees will be able to move out of those investments within a reasonable amount of time.

PILGRIM (on camera): Some investors still insist that they can manage very well without extra rules choosing when and how much of the company's stock to own. Legislators say they are just trying to help investors exercise their best judgment.

Kitty Pilgrim, CNN Financial News, New York.

(END VIDEOTAPE)

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