NU Online News Service, Mar. 7, 10:05 a.m. — Washington
Insurance agents and business groups are urging Congress to avoid placing undue restrictions on defined contribution plans in the wake of the collapse of Enron Corp., Houston.
“The Enron situation has certainly focused attention on 401(k)s and the general issue of retirement security,” said Dave Evans, vice president of retirement and financial planning for the Independent Insurance Agents of America, Alexandria, Va.
“However, we urge Congress to be careful because the devil is in the details,” Evans said at a recent House Education and the Workforce Subcommittee hearing.
From IIAA’s perspective, he said, the major issue is a proposal to cap “blackout” period for 401(k) plans. The blackout period involves a specified time following a change in 401(k) plan recordkeepers in which participants cannot change the account investments.
Evans noted that the blackout period exists so that the new recordkeeper can fully reconcile participant balances as reported under the previous recordkeeper with the information provided by the bank or investment managers’ statements.
The problem, Evans said, is that an artificial cap on the length of the blackout period would create a serious burden for smaller plans.
Larger retirement plans, he said, given the sophistication of their resources, can complete reconciliation task in about two weeks.
However, for smaller employers, the task can take several weeks, Evans said.
Evans noted concerns in the Enron situation that a change in recordkeepers was initiated to create a blackout period in order the thwart the ability of plan participants to change their investments, particularly Enron stock.