Date: 2002-01-23
Speaker: GEORGE MILLER (democrat)
Chamber: H
State: California

Mr. Speaker. the Congress and the public have been struggling with the issues surrounding the Enron debacle. the meltdown of this company and its impact on employees and on pension plans of people who were locked into their plans and could not escape at the time that insiders within the company were selling stock. A whole range of reasons have been given as to why this was the rule. but in point of fact. a corporation simply made a decision that -workers were going to be treated differently than management. that while the management could sell stock at any time. somehow the employee who chose to sell his or her stock would disrupt the market. The fact is probably that management sold much more stock than the employees hold. and it never disrupted the market. The reason for the disruptjon of the market around Enron is different than the sale of those stocks. Today. we learned that Kmart employees suffer from the same handicap. While Kmart has been heading toward Chapter 11 -bankruptcy for the last month or so. we find out that Kmart again has a provision very much like Enron. and that is that employees cannot sell their stock. In Enron. you could not sell the stock until you were 50. At Kmart. you could not sell it until you were 55. But if you chose to sell it. you would have to pay a very substantial. a very substantial penalty for the withdrawal of the employee contributions. This is even for vested individuals. In spite of that. thousands of individuals are cashing in. They" are paying a penalty when they sell their stock. Management is not paying a penalty when they sell their stock. It is clear that we need for vested employees in a pension plan to have complete control over their assets. The idea of management contributing corporate stock is not a bad idea. The idea of corporations matching is not a bad idea. But for the vested employees. the bad idea is that they cannot control their holdings. H20 Mr. Speaker. I have introduced legislation that will provide employee .control over their assets of their pension planh once they are vested. It is important that this happen. As we see again today with the Kmart employees. had they had control over their plans. if they were not required to pay a penalty. they could have exercised the independent judgment that so many people say retirees must be able to exercise. One of the reasons we say we want Americans to have 401(k) plans. the supporters do. as opposed to Social Security. is they can exercise their judgment. But if these plans are prohibited. if pension plans are out of the control of workers. and they have no way of knowing what is happening within the corporation. then they really do not have the exercise of power over the assets that have been put away for them. In the situation of Enron. not only do we have a corporation engaging in fraud and inside dealing. but the entity that was supposed to certify it to employees and other investors was engaging in the same fraud. the deceptions and the criminal behavior. I believe. So where does the employee go? Yet those employees were trapped in that pension system. The same is true in Kmart. Kmart looks more like a classic bankruptcy case. They made a series of bad business judgments. lost market share. their competitors outfoxed them. and now they are having trouble and seeking protection of the bankruptcy courts. Yet they locked their employees in. or at least locked them in where the employee would have to consider. because once the employee in Kmart exercised their judgment to sell the stock that was contributed by the employer. they would pay a very hefty penalty. and then they would be prohibited from having any further contributions by the employer. That is not a system which puts value on the ability of the employee in a vested plan to make these decisions. Mr. Speaker. it is also reported today that Sears requires their employees to hold on to their stock. although apparently not 100 percent of the stock. but to hold on to the stock. We see now that they are impacted in the same way in terms of their ability. What we are talking about here is the ability of individuals to rescue their retirement. As we saw in Enron. we have seen families and individuals and couples who have had their retirement destroyed by the criminal behavior of Enron and Arthur Andersen. They should not have that retirement destroyed by the bad business decisions of Kmart when they are in a vested plan. Mr. Speaker. I urge support of our legislation to make sure that Americans have control over their pension plans and they cannot be locked down by their employer.