If lawmakers get their way, employees will be able to dump their company’s stock much sooner than current rules permit.
The House Ways and Means Committee approved a measure that would cut the amount of time employees can be required to hold on to matching stock contributions from their companies. The legislation is similar to a plan offered by President Bush.
According to the proposal, employees would be allowed to sell matching 401(k) stock contributions from their employer after three years. For other types of company plans, such as Employee Stock Ownership Plans (ESOPs), participants would be permitted to unload nonelective contributions of employer stock after five years.
Currently, employers can require employees to hold on to the matching contributions for a specified period of time. Often, that period is a minimum number of years at the company or a milestone birthday.
Such requirements came under fire after Enron employees saw large portions of their pension accounts shrivel to nearly zero after the energy company filed for bankruptcy.
Under the House bill, companies must give employees at least a 30-day advance notice whenever there is a significant period that employees can’t access their accounts, such as when the employer is changing retirement-plan administrators. This was also a major issue for Enron plan participants.
The bill also requires companies to explain to employees on a quarterly basis generally accepted investment principles, such as the importance of constructing a diversified portfolio.
What’s more, corporations face possible excise taxes if they don’t meet the investment and blackout period notification requirements. Also under the bill, employees can pay for retirement advice from a professional on a pretax basis.