73 Pages Posted: 23 Jun 2009
Date Written: June, 19 2009
With the fall of numerous Fortune 500 companies, including Enron and WorldCom, 2002 will long be remembered as the year where corporate executives placed their own personal wealth before shareholders’ and employees’ well-being.
In response to corporate greed and misdeed, 2002 will also be remembered as the year in which Congress enacted the Sarbanes-Oxley Act to address the accounting and corporate responsibility issues raised by the Enron debacle, the SEC adopted new regulations with additional corporate disclosure and audit committee requirements, and the NYSE’s and the NASDAQ’s corporate governance task forces adopted new listing standards and codes of corporate conduct.
What 2002 will not be remembered as is the year of meaningful pension reform. In the wake of billions of dollars in losses attributable to 401(k) plan company stock holdings, Congress failed to enact one single pension reform bill that protects 401(k) plan participants from excessive investment in company stock. Congress stressed corporate accountability and oversight in enacting the Sarbanes-Oxley Act, but rejected those same principles in the area of pension reform.
This article examines the historical role of company stock ownership in tax-qualified retirement plans and how Congress is distorting that role to justify its failure to enact meaningful pension reform that restricts 401(k) plan investment in company stock. Specifically, the article addresses H.R. 3762, the Republican-backed House Bill that has arisen like a phoenix out of the ashes of more than 20 pension reform bills introduced by the 107th Congress. The article examines how the House Bill fails to deliver ERISA’s promise of a secure retirement by rejecting overall limitations on 401(k) plan investment in company stock, by failing to mandate the appointment of an independent plan fiduciary where company stock is offered as an investment alternative, and by failing to mandate that employers provide participants with investment advice as a condition of fiduciary liability relief.
Keywords: pension reform, 401(k), retirement, tax-qualifed retirement plans, ERISA
JEL Classification: J26, K31
Suggested Citation: Suggested Citation
McClendon, Janice Kay, Pension Reform in the Aftermath of Enron: Congress' Failure to Deliver the Promise of Secure Retirement 401(K) Plan Participants. (June, 19 2009). Kentucky Law Journal, Vol. 92, No. 1, 2003-2004. Available at SSRN: https://ssrn.com/abstract=1422700