We've been following the trail of the attack on the pension system on a regular basis here. Down there, inside the Beltway, there's been a fight brewing of how to "reform" the pension system, with two competing bills duking it out: A House version and a Senate version.
From where I sit, neither is great shakes for different reasons. Neither one really takes a long-term look with some visionary approach. Neither one encourages employers to stay in the defined benefit system, which, in my view, is the only stable option for workers: it guarantees a specific benefit to retirees and is less dependent on the wild swings of the stock market. At the same time, neither bill figures out how to expand non-defined benefit programs. It seems mostly catering to special interests--such as the airline industry--as a patch to fix the financial problems facing pensions.
But, the House bill is worse. And even The Wall Street Journal kind of agrees, calling the Senate bill more "populist."
Pension Measures Remain Far Apart Even the Conference Panel That Will Reconcile House, Senate Bills Is a Matter of Dispute
By MICHAEL SCHROEDER February 21, 2006;
Page A4 WASHINGTON -- After two years of debate, the House and Senate recently passed bills to force companies to better fund their pension plans and shore up the Pension Benefit Guaranty Corp., the federal insurer of traditional company-sponsored plans. Now comes the hard part: reconciling the two measures before sending legislation to President Bush.Making the task more difficult is that the two Republicans who pushed the legislation this far in their respective chambers -- Ohio Rep. John Boehner, the newly elected majority leader, and Iowa Sen. Charles Grassley, chairman of the Finance Committee -- are far apart on a handful of critical issues.
Mr. Boehner, as former chairman of the Committee on Education and the Workforce, was instrumental in putting together a bill geared toward helping the business community and Wall Street. Mr. Grassley, who became interested in pension legislation after the bust up of Enron Corp. wiped out employee retirement savings, has helped craft a more populist bill.
Calling Grassley a "populist" is a stretch given the special interests he often cozies up to. But, the definition comes down to a fight over how much direct access Wall Street should be given to the pension plan money.
The House version of the bill would allow investment firms to offer advice to participants in 401(k) plans even if the firms' mutual funds are among employees' investment choices.
Federal labor laws long have banned this on the theory that the investment firms would favor their own funds, even if a competitor offered a better choice.
Wall Street wants to lift this restriction, especially since it is likely that the pension legislation will give companies the option to automatically enroll employees in 401(k) plans. That potentially would bolster the number of employees in the plans, under which employees set aside pretax dollars for retirement.
This is a lucrative business for financial-services firms such as Goldman Sachs Group Inc., Fidelity Investments and Citigroup Inc.
Mr. Boehner has been Wall Street's champion on the issue, arguing for years that the law should be changed because employees with 401(k) plans need professional advice to earn better returns. The securities industry has been a leading contributor to his political action committee -- $644,473 since 1989, according to the Center for Responsive Politics.
Mr. Grassley, meanwhile, has fought to keep the restrictions and the Senate's measure would continue the ban on direct advice from fund firms. It would encourage companies to hire neutral third-party advisers to tell employees where they should put their money.
"This is one issue on which [Mr. Boehner and I] haven't been able to see eye-to-eye," says Mr. Grassley, who has received $378,502 from Wall Street contributors since 1989. "After the corporate and Wall Street scandals of recent years, this is no time for a blind spot on conflicts of interest."
Grab for your wallet. Wall Street smells more dough to rake in off the backs of workers.
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