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Before The
House Committee on Education and The
Workforce
Oral Testimony
February 6, 2002
Good morning, Chairman Boehner, Ranking Member Miller, and members of
the Committee.
I appreciate the invitation to appear before the Committee today to
discuss the President's plan to protect workers' retirement security.
Forty-two million Americans have 401(k) accounts through their
employers, owning a total of $2 trillion in assets. These aren't just
statistics; they represent the hopes and aspirations of millions of Americans
for a secure, decent retirement.
In a few weeks' time, thanks to the work of members of this Committee,
we will convene the "SAVER Summit." This unique event is dedicated to the
premise that Americans should be encouraged to save and plan for the future.
I think we all agree that the best incentive to save we can offer is to
protect the security of those savings, whether they are held in a 401(k) or a
company or a union pension plan.
The President's plan will help those who are saving for retirement by
giving workers more choice, confidence and control over their retirement plans.
- The choice of how to invest their retirement savings in ways that
work best for them and their families
- The confidence in their investment decisions that comes from getting
reliable and professional financial assistance
- And the same degree of control over their investments that any other
worker enjoys - from the top floor to the shop floor.
The first principle of the President's plan is expanding Americans'
freedom of choice over their retirement investments.
Over the last twenty years, there has been a revolution in the way that
people plan and save for retirement. The 401(k) plan has helped make America a
nation of investors. Workers at every income level are being empowered to make
their own decisions about their financial futures, based on their families'
needs and goals.
That increase in freedom has opened up the potential for a better
quality of life for millions of Americans. But like every other increase in
freedom, it has also introduced new risks. Recent corporate bankruptcies have
revealed the need for stronger safeguards to protect workers.
We believe that one important way to reduce these risks is to give
workers even more freedom, not less; more choice, not less.
That's why the President's plan will give workers a right that the
employees of Enron did not have: the right to sell company stock contributed by
an employer to their 401(k) after a three-year period.
For most individual investors, diversification is the key to reducing
risk over the long term. And the President's proposal will give workers the
right to make that choice.
We need to remember: it's their money. They earned it, they sacrificed
to save it; and they should have the right to decide how to invest it.
For that same reason, freedom of choice also means that Washington
should not be allowed to set arbitrary limits on how much company stock a
worker can hold.
While it may be tempting to go down this road in the wake of recent
business failures, this would actually take away from workers the right to
choose which they deserve. Arbitrary limits on workers' investment choices
would not be progress; it would be turning back the clock.
Our modern economy is far from perfect. But one of the wonders of the
American system is that a secretary from Microsoft or Home Depot can become a
millionaire by working hard, sticking with their company and investing in it.
Of course, Enron did not turn out like Microsoft or Home Depot. But one
thing our country stands for is the belief that individual Americans should
have the right and the freedom to make their own financial choices, based on
what is best for them and their families. This is the core of what the entire
world calls the American Dream.
Restricting workers' choices won't necessarily make their investments
safer; it will just reduce the freedom that workers have to shape their own
financial futures.
At the same time, choice all by itself will not ensure the security of
workers' retirement savings. People need to have confidence in the decisions
they make about their investments, and that comes from getting reliable
investment assistance and accurate financial information.
That's why our plan incorporates Chairman Boehner's Retirement Security
Advice Act - which passed the House with an overwhelming bipartisan
majority.
Mr. Chairman, I hope you don't mind that we borrowed your fine work on
this issue.
PAUSE
As this Committee knows, these provisions would encourage employers to
make investment assistance available to their employees, by giving them access
to professional financial advisers.
On this point, I think we need two important reality checks: first, the
last year or so has been pretty tough sledding for the average individual
investor. And second, most people simply don't have the time or inclination to
become experts on managing financial portfolios, even their own.
They have jobs to do, children to take care of, school activities to
support, and bills to pay.
Especially in these less certain economic times, people are in desperate
need of help as they chart a retirement strategy that fits their unique
circumstances and goals.
In the same way that we provide retirement benefits through employers,
we believe it is possible to provide retirement financial assistance through
employers in a way that safeguards the workers who receive these benefits.
Just as ERISA currently provides, we would require investment advisers
to act solely in the interests of the employees - and we will go after anyone
who violates this vital trust.
Advisers would also be required to disclose any conflicts of interest
they may have - and any fees they may earn - in recommending particular
investments.
Employers themselves would be responsible for choosing an appropriate
investment adviser, and monitoring the program on behalf of their employees.
And our Department is committed to expanding our outreach efforts to let
workers know what their rights are, what information they should be getting,
and how to raise concerns about self-dealing by financial advisers.
With these safeguards, we can give workers the confidence they need to
make good investment decisions and build a secure retirement.
PAUSE
Finally, workers need to have the assurance of control over their
retirement savings, regardless of whether they are a senior executive or a
rank-and-file worker.
They need to have ample opportunity to make investment changes before a
blackout period begins. They must be guaranteed that their employers will be
held to the highest standards of conduct, that employers will act prudently and
solely in their interests during a blackout period.
And workers should be assured that everyone - from the CEO on down -
will have to abide by the same set of restrictions.
The President's plan will achieve this by requiring that workers be
notified a full 30 days in advance that a blackout period will be imposed.
Our proposal will prevent corporate officers from selling or purchasing
any company stock while workers are prohibited from trading in their 401(k)
plans during a blackout.
We will also amend ERISA to clarify in no uncertain terms the fiduciary
responsibility and accountability of employers during blackout periods.
PAUSE
Taken together, these measures proposed by the President will give
workers the choice, confidence and control they need to protect their savings
and plan for a decent retirement.
The choice to make their own decisions, the confidence that comes from
good information and accountability, and a level playing field that gives
workers control over their retirement savings.
As the President said in his State of the Union address, a good job
should lead to security in retirement.
We know. At the Department of Labor, retirement security is our
specialty. In the year 2001 alone, we conducted nearly 4,000 employee benefit
investigations, obtained 76 indictments and 49 convictions, and recovered $662
million on behalf of aggrieved beneficiaries.
We were on the ground investigating Enron before it even declared
bankruptcy. And we are doing everything we can to try to help these workers.
Whatever kind of retirement plan an employee may have - whether it be a
401(k) or a corporate or union pension plan, our goal is to protect all
hard-working Americans - from the cubicles of Palo Alto to the shop-floors of
Detroit - so they can look to their retirement with confidence and hope.
Thank you for giving me the opportunity to address this important
subject today. We look forward to working with Chairman Boehner and this
Committee to ensure greater retirement security for all Americans.
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