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For Immediate Release
Office of the Press Secretary
February 1, 2002
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"A good job should lead to security in retirement. I ask Congress
to enact new safeguards for 401(k) and pension plans. Employees who have
worked hard and saved all their lives should not have to risk losing
everything if their company fails."
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President George W. Bush
State of the Union Address
January 29, 2002
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In his State of the Union Address, President George W. Bush called on
Congress to enact important new safeguards to protect the pensions of
millions of American workers. The President called on Congress to move
quickly to enact these important reforms so that people who work hard and
save for their retirement can have full confidence in our retirement system.
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Today, President Bush announced that he has approved the recommendations of
a Cabinet-level Task Force on Retirement Security, which has made specific
recommendations for legislative action to better protect workers’
pensions. The Bush Administration will be working with Congress on a
bipartisan basis to ensure that these reforms become law.
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About 42 million American workers own 401(k) accounts with a total of $2.0
trillion in assets. These workers need to have full confidence in the
security of their pension plans.
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Under current law, companies can force workers to hold
company stock in their 401(k) plans for extended periods of time. Workers
also may not receive adequate advance notice of so-called “blackout
periods” – times when employers change pension plan features or
administrators, during which workers cannot control their retirement savings
accounts. And, too many workers lack access to investment advice and
useful information on the status of their retirement savings.
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To address these problems, President Bush created a Task Force on Retirement
Security -- comprised of Treasury Secretary Paul O’Neill, Labor Secretary
Elaine Chao, and Commerce Secretary Don Evans – on January 10. The
Task Force was charged with developing new safeguards to protect the
pensions of American workers.
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President Bush today is announcing a four point pension protection proposal
that will: (1) provide workers greater freedom to diversify and manage their
own retirement funds; (2) ensure that senior corporate executives are held
to the same restrictions as average American workers during “blackout
periods” and that employers assume full fiduciary responsibility during
these times; (3) give workers quarterly information about their investments
and rights to diversify them; and (4) expand workers’ access to investment
advice.
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Giving Workers Freedom To Diversify: Employers should be encouraged to
make generous contributions to workers’ 401(k) plans, including the option
to use company stock to make matching contributions. However, workers
must be free to choose how to invest their retirement savings. The
President’s proposal will ensure that workers can sell company stock and
diversify into other investment options after they have participated in the
401(k) plan for three years. While many companies already allow rapid
diversification, others impose holding periods which can last for decades.
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Creating Parity Between Senior Corporate Executives and
Rank-and-File Workers: President Bush believes it is unfair for workers to
be denied the ability to sell company stock in their 401(k) accounts during
blackout periods while corporate officers face no similar restrictions on
selling stock held outside the 401(k).
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The President has directed the Task Force to develop appropriate policies
that would preclude senior corporate executives from selling company stock
during times when workers are unable to trade in their 401(k) plans.
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The Task Force recommendations will clarify that
employers have a fiduciary responsibility for workers’ investments
during a blackout period. Under current law, when 401(k) plans are
controlled by workers, employers are not responsible for the results of
workers’ investment decisions. This “safe harbor” from liability
will no longer apply during a blackout period. During these times,
employers will be responsible for the consequences of the workers’
inability to independently control their investments if they violated
their duty to act in the interests of the workers when they created the
blackout period.
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Giving Workers Better Information About Their Pensions:
The President proposes to increase worker notification of blackout
periods and provide workers with quarterly benefits statements about their
individual pension accounts.
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To ensure that blackout periods are fair, responsible
and transparent, the President’s proposal will ensure that workers
have ample opportunity to make investment changes through a requirement
that they be given a 30-day notice before any blackout period begins.
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To enable workers to make independent, informed
decisions, employers will be required to give workers quarterly benefit
statements that include information about their individual accounts,
including the value of their assets, their rights to diversify, and the
importance of maintaining a diversified portfolio. The Secretary of
Labor will be given authority to tailor this requirement to the needs of
small plans. Under current law employers are only required to make
statements available to workers on an annual basis.
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Expanding Workers’ Access to Investment Advice:
The President calls on the Senate to pass the Retirement Security
Advice Act – which passed the House with an overwhelming bipartisan
majority. This legislation encourages employers to make investment advice
available to workers and allows qualified financial advisors to offer
investment advice only if they agree to act solely in the interests of the
workers they advise.
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