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BETHESDA, MD -- MARCH 25, 2002 -- The Committee on Investment of Employee Benefit Assets, an affiliate of the Association for Financial Professionals (CIEBA of AFP), supports policy changes to strengthen the private sector retirement system and enhance confidence in retirement plans. Such changes should be administratively feasible, and avoid creating a new regulatory regime or adding significant costs to plans or participants. CIEBA of AFP expressed these opinions in a March 19 policy paper, delivered to Congressional staff members who examined related bills last week in Washington.
The CIEBA of AFP position paper supports many of the items currently under Congressional consideration including:
- Allowing retirement plan participants to diversify company stock received as a match after three years
- Disallowing employer stock as an option for elective deferrals if matching contributions are required to be in company stock, when the 401(k) plan is the primary retirement vehicle for participants
- Requiring adequate notice (30 days) prior to any "blackout" period
- Limiting the ability of senior executives to sell company stock during "blackouts"
- Removing barriers to investment advice to participants
"Any legislation passed to strengthen the private sector retirement system must include adequate transition rules," said Jim Kaitz, president and CEO of AFP. "Plan sponsors will need sufficient time to implement changes responsibly, and to inform and educate plan participants. Similarly, participants need time to understand the impact of such rules and how changes may affect their retirement planning."
Kaitz added that CIEBA opposes requiring participant representation on retirement plan boards (joint trusteeship), expanding legal remedies against plan sponsors or passing rules that would increase complexity and cost without adding value to participants.
Congress Considers Legislation
Legislation on company stock in 401(k) and other individual account plans were the focus of Congressional attention last week. While several bills have been introduced on this subject including The Employee Retirement Savings Bill of Rights (H.R. 3669 - Portman/Cardin) and The National Employee Savings and Trust Equity Guarantee Act (S. 1971 - Grassley), two bills currently are being marked up in committees:
- H.R. 3762 (Boehner/S. Johnson) The Pension Security Act of 2002
- S. 1992 (Kennedy) Protecting America's Pension Act of 2002
Issues addressed in the various bills under consideration include enabling participants' diversification of company stock received as a match after three years, and advanced notice prior to any "blackout" periods. Other provisions would clarify employer liability for fiduciary breaches and prohibit senior executives from selling company stock during these "blackouts." Summaries, legislative status and full text of these bills can be found at www.thomas.loc.gov.
The Committee on Investment of Employee Benefit Assets, better known as CIEBA, is the voice of the Association for Financial Professionals (AFP) on employee benefit plan asset management and investment issues. CIEBA represents more than 110 of the country's largest pension funds today and became affiliated with AFP in the spring of 2000. CIEBA's members manage more than $1.6 trillion of plan assets, on behalf of 16.5 million plan participants and beneficiaries.
The Association for Financial Professionals in Bethesda, Maryland, supports more than 14,000 individual members from a wide range of industries throughout all stages of their careers in various aspects of treasury and financial management. AFP is the preferred resource for financial professionals for continuing education, financial tools and publications, career development, certifications, research, representation to legislators and regulators, and the development of industry standards.
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