NU Online News Service, April 12, 11:51 a.m. — Washington
The pension legislation approved late yesterday by the U.S. House of Representatives is drawing a cautious reaction from employers.
Insurers, meanwhile, are expressing strong support for one provision of the legislation, H.R. 3762.
The bill, which was passed by a 255-163 vote, would require defined contribution plan administrators to provide participants with 30 days’ notice of a “lockdown period” — a time during which participants are not allowed to sell or reallocate their assets.
In addition, the bill imposes fiduciary liability on employers during lockdowns unless the employer meets certain requirements, such as limiting the lockdown to a “reasonable” period and acting solely in the interests of participants when determining to enter it.
From the insurance company and agent perspective, H.R. 3762 contains language, strongly supported by the industry, which allows those that provide services to pension plans to also provide investment advice to plan participants, subject to disclosure requirements.
Regarding the overall bill, Mark J. Ugoretz, president of the ERISA Industry Committee, Washington, an employer group, questions whether Congress fully considered the implications of the legislation.
He notes that last year, Congress enacted a pension reform bill, the Portman-Cardin Act, that was the result of five years of drafting, redrafting and vetting.
“But this bill [H.R. 3762] flew through the House before anyone could fully assess all of the implications it will have for employee retirement savings,” Ugoretz says.
“Nor did the House have an adequate opportunity to determine whether pension issues are at the core of the Enron employees’ troubles,” he adds.
H.R. 3762 was developed in the wake of allegations that Enron abused employees who participated in the bankrupt company’s pension plan.
As for the investment advice component of H.R. 3762, Kathryn Ricard, vice president of retirement and pensions with the American Council of Life Insurers, Washington, praises the legislation.
The financial services firms that are already providing services and products to plan sponsors, such as life insurers, are the best equipped to advise employees on their investments, she says.
The language, Ricard says, will give employees access to a wide range of financial professionals as they make their investment decisions.
The investment advice language is also strongly supported by the National Association of Insurance and Financial Advisors, Falls Church, Va., and the Independent Insurance Agents of America, Alexandria, Va.