WASHINGTON, Sept. 26 (UPI) -- The Democratic-led Senate has been sitting on pension reform legislation passed by the Republican-led House last spring, but the Democrats say there is a good reason: the proposed reforms won't effectively protect the average worker.
On Wednesday, a coalition of Democratic congressional leaders and labor-union groups blasted the House pension reform bill as biased towards corporate interests and being too little, too late, given corporate scandals such as those at Enron Corp. and WorldCom Inc.
The precipitous bankruptcy of these two large corporations -- Enron in December 2001, WorldCom this summer -- left thousands of employees effectively without pensions, because of flaws in those companies' 401(K) plans.
At Enron, the company's 401(K) plan was overwhelmingly invested in company stock, rendering it worthless after bankruptcy.
Appearing at Wednesday's news conference were Sen. Jon S. Corzine, D-N.J., House Minority Leader Richard Gephardt, D-Mo., and three California Democrats -- Reps. Nancy Pelosi, Robert Matsui and George Miller -- plus AFL-CIO leader John Sweeney. They called for changes to the House pension reform measure, which is in limbo between the Senate and the House.
According to critics, the House Pension Security Act, H.R. 3762, contains a provision -- Section 204 -- that would encourage corporations to renege on their obligations to provide pension coverage to low- and middle-level employees, while maintaining lavish pension benefits for the highest-paid employees.
"It is imperative that we enact reforms that will protect the retirement savings of American workers. Unfortunately, rather than protecting their savings, the House bill would undermine the financial security of America's retirees," said Corzine.
Corzine said that the House-backed bill rolls back what is a key provision of the current pension law, which requires companies to provide a percentage of their workers with access to the same pension coverage as those given to senior management, to qualify for federal tax subsidies.
The New Jersey senator noted that the House pension reform bill would also allow financial advisers who administer pension funds to provide investment recommendations to employees, meaning that these advisers could essentially sell their own products.
"Employees deserve access to independent investment advice and corporate executives should not be allowed to cash out while employees are locked in. Real pension reform will help ensure that these worker abuses do not occur," Corzine said.
Republicans countered the criticism of the Pension Reform Act, claming that the bill would give workers more freedom to diversify their 401(K)s.
The bill's author, Rep. John Boehner, R-Ohio, chairman of the House Education and Workforce Committee, defended the pension reform bill, saying that it was passed with significant bipartisan support -- noting that 46 House Democrats voted for the bill.
According to the Ohio congressman, the bill was meant to give workers new tools to protect retirement savings.
"As Democratic leaders hold press conferences professing their support for pension reform, workers remain vulnerable. Why don't they stop talking, stop posturing, and pass something?" Boehner said.
"If Senate Democrats are serious about protecting the pension security of American workers, where have they been for the past 160 days?"
To Boehner, the provision permitting investment advice from pension fund administrators to workers is a plus. He criticized Senate Democratic leaders for attempting to gut provisions in the House-passed bill that permit this, saying this was a benefit already enjoyed by senior executives.
"Eighty-nine percent of American workers say they want their employers to provide them with financial planning advice," he noted.
For Harvard law professor Daniel Halperin, a pension expert, the risk of the H.R. 3762 changes outweighs any benefits.
He told United Press International that while the House bill "does give employees some minimal rights to diversify holdings in employer securities ... significant risks of another Enron remain.
"I believe on balance passage of the House bill would be a serious mistake," he said, adding that Section 204 of the bill "creates a substantial risk of a significant loosening of the requirements that a retirement plan not discriminate in favor of highly compensated employees."
Halperin said: "This requirement should be tightened. Instead, we get the possibility that a high percentage of rank and file workers could be excluded."
(Workforce is a bi-weekly labor and workplace column that highlights issues of key importance to American workers of all occupations. Send comments to: [email protected])
