WASHINGTON — On Dec. 21, 1999, in Enron’s chest-puffing days, the company churned out a press release to tout its status as one of Fortune magazine’s “100 best companies to work for in America.”
“Our corporate culture and our world-class employees make Enron a great place to work,” said Kenneth Lay, the company’s chairman and chief executive officer. “We are proud to receive recognition as a top workplace; it’s a reflection of our commitment to our employees and their key role in our company’s success.”
Now Lay is gone, and Enron Corp.’s commitment to employees, especially its retirement savings plans, is under high-profile congressional scrutiny. And the story of how many Enron workers watched their 401(k) plans, the savings program designed to ensure a comfortable retirement, become nearly worthless is sparking
a broader debate on the potent political issue of retirement security.
“I’ve watched this go from a backwater technical issue no one paid attention to, to now being one of the core issues people think of,” said Rep. Earl Pomeroy, D-N.D., a leading pension authority in Congress. “As a result, the politics behind it have grown hotly charged as well. This is a mixed blessing.
“The good news is Congress is now interested,” Pomeroy said. “The bad news is Congress is now interested. This is an area where ill-advised, well-intentioned legislation can do some serious damage.”
Even before the hearings started, several legislative proposals have been introduced. One, by Sens. Barbara Boxer, D-Calif., and Jon Corzine, D-N.J., would limit employee contributions in company stock to 20 percent of the total and employees could convert any matching company stock to another financial instrument within 90 days. To reduce the appeal of granting a match in stock, the legislation also would cut tax breaks for matching company stock in half.
Another proposal, offered by Rep. Charles Rangel, D-N.Y., calls for a federal tax penalty on sales of stock by company insiders if other lower-ranking employees are restricted.
The federal government can only loosely regulate most employee benefits because companies provide them on a voluntary basis. And, as workers often come to find, companies almost universally reserve the right to change, amend or terminate any or all of those benefits.
Businesses are far more likely, however, to emphasize benefits as an inducement to sign on and stay with a company. Enron’s employee handbook, for instance, lays out a rich buffet of benefits in addition to the 401(k) plan: a stock options plan that awarded up to 25 percent of salary in Enron stock options, subsidized membership at The Body Shop fitness center, complete with tai chi and Pilates classes, and an on-site doctor’s office.
Like many companies, Enron also offered a 401(k) savings plan, listing its stock as the first option of many investment funds available. The company matched each $1 an employee contributed with 50 cents worth of Enron stock.
Those who chose the Enron option were rewarded famously as the stock value soared. But as Enron’s stock plummeted, they learned the crushing reality of the risk inherent in 401(k) plans. The plaintive stories of families whose retirement savings were wiped out will no doubt be told during the course of the hearings.
Congress is likely to respond in some fashion, and Pomeroy and others are concerned that lawmakers could actually set back the cause of retirement security. For instance, if Congress were to regulate 401(k) plans too heavily, companies might choose to not offer them, putting workers’ retirement in even greater peril.