I am particularly concerned about the Enron employees whose pension plans were decimated as the price of Enron's stock plummeted. Thousands of employees were unable to sell their Enron stock and thus lost their retirement nest eggs, while top executives walked away with handsome profits on the sale of their Enron stock.
Congress owes it to these employees who have lost so much – as well as to future investors – to take a close look at the rules governing the 401(k) plans relied upon by so many Americans as a future source of retirement income. Private pensions are intended to help Americans reach the goal of retirement security. While the details are only beginning to emerge, it is estimated that 15,000 Enron workers have lost $1.3 billion of the $2.1 billion that was in the company's 401 (k) plan a year ago.
Like Enron's employees, many American workers have a disproportionate share of their employer's stock in their 401(k) plans. At some companies, workers have as much as 90 percent of their 401(k) retirement assets in their employer's stock. It cannot be disputed that doing so has made some Americans wealthier than they could ever have dreamed. Still, investing large portions of one's 401(k) in any one company's stock poses significant risks because of the lack of diversification.
The Enron debacle raises the important question of whether employees with 401(k) plans have adequate access to disinterested financial advice. Over the past several years, the demand by 401(k) plan participants for individualized investment advice has been growing, yet fewer than a third of employers offer this service. As demonstrated in several recent surveys, many employers are not offering this invaluable resource due to liability concerns.
Senator Jeff Bingaman (D-NM) and I have introduced bipartisan legislation that would encourage employers to arrange for independent investment advice for their employees. One cannot say for certain whether more investment advice would have changed the outcome for Enron's employees, but I am hopeful that it would help to prevent future cases of workers losing their entire savings. Most employees seeking to invest their 401 (k) plan assets – like most Enron employees – are not high-rolling investors, but rather hardworking people who seek a secure future. The stories of the thousands of Enron workers who have lost their hard-earned savings in the Enron debacle underscore the need to empower individual investors with the knowledge they need to make prudent investment decisions. They also point to the need for a thorough and vigorous investigation into every aspect of the company's collapse so that we can ensure that we are not again blindsighted by a bankruptcy of this magnitude that results in catastrophic consequences for so many employees and shareholders.