On July 11, the Senate Finance Committee passed S. 1971, “The National Employee Savings and Trust Equity Guarantee Act,” a bill that is designed to protect employees’ pension plans post Enron.
The Senate bill allows employees to divest company stock in their 401(k) or other defined benefit plan after three years; requires plans to give participants 30 days’ notice prior to a company plan “blackout period,” during which employees are prohibited from conducting account transactions; and requires employers to provide quarterly statements to participants telling them how much of their account is invested in company stock.
The bill, sponsored by committee chairman Senator Max Baucus (D-MT), also includes a safe harbor provision on the contentious investment advice issue, and supports a bill sponsored by Senator Jeff Bingaman (D-NM) that permits only investment advisor reps or registered reps to dole out 401(k) advice to plan participants. Senator Charles Grassley, (R-IA), said “there are two very different points of view on investment advice”–Bingaman’s view favoring independent advice, and that offered in H.R. 2269, The Retirement Security Advice Act, sponsored by Rep. John Boehner, (R-OH). That bill, which already has passed the House, allows financial services companies that administer 401(k) plans to give investment advice to employees.
“I absolutely agree with comments by Senator Grassley that there are two very different points of view on how to give investment advice,” says Duane Thompson of the Financial Planning Association. “The Senate version is very advantageous to the employer in encouraging and clarifying that the employer hand over the liability to an advisor. But I don’t think there’s any special advantage for the independent financial planner or investment advisor in that bill, because it can certainly permit a large wirehouse or Fidelity to give that advice; it makes no distinction between that entity and a small financial planning firm,” he says. “What it does do, and we have talked to Senator Bingaman to clarify this, is to include state registered investment advisors as well.”