After the Enron Bankruptcy: The U.S. House Legislative Process of Three Bills Designed to Protect Employees Investments and Retirement Assets
The Retirement Security Act of 2001 is intended “to promote the provision of retirement investment advice to workers managing their retirement income assets.” (H.R. 2269, 2001) The Pension Security Act of 2002 is intended to protect participants in individual account plans from over investment in employer securities and “prohibit[s] insider trades during any suspension of the ability of plan participants or beneficiaries to direct investment away from equity securities of the plan sponsor.” (H.R. 3762, 2002) However, the Pension Security Act of 2002 incorporates many provisions from the Retirement Security Act of 2001. The Employee Pension Freedom Act of 2002 is intended to “provide for improved disclosure, diversification, account access, and accountability under individual account plans.” (H.R. 3657, 2002)
The Enron bankruptcy in which thousands of Enron employees lost their retirement savings while executives cashed out stock during a “lock-down” period illustrates the need for legislation aimed to protect employee investments. (Gordon, 2002)
Republican Representative John Boenher introduced the Retirement Security Act of 2001, H.R. 2269, to the House on June 21, 2001. Republican Speaker Hastert referred the bill to the Committee on Education & the Workforce and the Committee on Ways & Means. Each committee was given jurisdiction on different parts of the bill. Multiple referrals were used since the majority party wanted to see the bill passed. Speaker Hastert gave both committees deadlines but both received their requested extensions for these deadlines. (H.R. 2269, 2001)
Almost a month later on July 17, 2001, the Committee on Education & the Workforce referred H.R. 2269 to its Employer-Employee Relations Subcommittee for subcommittee hearings. On August 2, after considering the bill and conducting a mark-up session on it, the subcommittee forwarded it to the full committee by a voice vote. The Committee on Education & the Workforce ordered the bill to be reported on October 3 with a 29-17 vote. The official report was released on October 31, 2001 and was included in House Report 107-262, Part 1. (H.R. 2269, 2001)
The Ways & Means Committee considered the Retirement Security Act of 2001, held a mark-up session, and ordered the bill to be reported on October 31, 2001 with a 25-15 vote. The official report was released by the committee on November 13, 2001 and was included in House Report 107-262, Part 2. (H.R. 2269, 2001)
At this point, the Rules Committee created House Resolution 288 that was introduced by Republican Representative Deborah Pryce as special rules for considering H.R. 2269. This resolution is necessary so that Congress can meet as a Committee of the Whole. This is done so debate can be limited, amendments can be limited, allows voice votes, and lowers the needed quorum from 218 to 100. (Salka, 2002A)
The rules as established on November 14, 2001 included a limited general debate of 1 hour and 40 minutes. The debate time would include 60 minutes that would be equally divided between Republican Chairman Boehner and the ranking member of the Committee on Education & the Workforce. The remaining 40 minutes would be divided between Republican Representative Thomas and the ranking minority member of the Committee on Ways & Means. (H. Res. 288, 2001)
The rules also included that a specified amendment was required to those who would like to speak about H.R. 2269 and no intervening motions were allowed except a motion to recommit the bill with or without changes. (H. Res. 288, 2001)
Recommitting the bill without changes would be a tactic the Democratic Party could have used to kill the bill. Since the Democratic Party was in the minority, this tactic probably would not work since a majority vote would be required to recommit the bill. Recommitting the bill with changes would allow the Democratic Party to slip on a rider by attaching a poison pill amendment or pork that would benefit a representative’s constituents. (Salka, 2002A)
The Committee on Education & the Workforce and the Committee on Ways & Means recommended amendments that would be printed in the Retirement Security Act of 2001 as a substitute in part A of the Committee on Rules report. The resolution was then placed without objection on the House Calendar, Calendar Number 174. It was then agreed to by voice vote on November 15, 2001. (H. Res. 288, 2001)
Voice votes can only be conducted in a Committee of the Whole, which can happen while deciding a bill’s resolution or after the resolution has been voted on and the special rules for debate on the bill still apply. (Salka, 2002A) A motion that was created to reconsider the bill received no objections. This motion ensures that House Resolution 288 can be amended in the future if it is deemed necessary. (H. Res. 288, 2001)
H.R. 2269 was then brought back before the full House for passage and was considered under the rules of House Resolution 288. House Amendment 386 is an amendment printed in House Report 107-289. The amendment was agreed to as amendment A001 for H.R. 2269 without objection on November 15, 2001. (H.R. 2269, 2001)
House Amendment 387 is a substitute amendment offered by Democratic Representative Robert Andrews. The substitute amendment, A002 for H.R. 2269, prohibited transaction rules in section 4975 of the Internal Revenue Code and would waive requirements listed in sections 406 and 408 of the Employee Retirement Security Act if “certain requirements concerning disclosure, the provision for alternative independent advice, qualifications of individuals providing advice, and remedies are made available to plan participants.” A voice vote was taken and the amendment had more “no” votes than “yes votes” according to the Speaker pro Tempe. Representative Andrews objected the vote because quorum was not present and made a point of order that a quorum needs to be present. (H. Amdt. 387, 2001) In Committee as a Whole, voice votes are allowed but any representative can request an electronic vote. Representatives usually request electronic votes for all controversial legislation. (Salka, 2002A) The Sergeant at Arms notified absent members and an electronic vote was conducted. (H. Amdt. 387, 2001) The failed amendment had a vote of 180-243. (R.C. 441, 2002) The bill as a whole went up for a recorded vote and passed the House with a 280-144 vote.
A motion to reconsider the bill was agreed to without objection. (H.R. 2269, 2002) This was made so that discussions of the bill could be made if the Senate passed the bill with changes. If the Senate made these changes, the House would compromise to create a version both chambers could agree with and then it would be sent to the President for final signature. (Salka, 2002A) The bill was received in the Senate and referred to the Committee on Finance on November 16, 2001. (H.R. 2269, 2002)
The Retirement Security Act of 2001 allows financial advisers who have affiliations with investment products to adequately compete with non-affiliated financial advisors. The current Employee Retirement Income Security Act severely limits the ability of employers to provide financial advice to their employees. H.R. 2269 will give participants information up front about fees and potential conflicts of interest as well as the limits to advice that can be provided. The Executive Office of the President feels that, “We must trust Americans to manage their own money. Given the necessary tools, everyone may become an owner of the American Dream.” (OMB, 2001)
It is important to note that H.R. 2269 only allows investment advice that is offered by a fiduciary adviser. A fiduciary adviser is a regulated qualified entity under federal and state laws. Examples of fiduciary advisers are banks, insurance companies, registered broker dealers, and registered investment advisers. The Department of Labor can seek criminal and civil penalties to advisers that give advice that benefit their own interest rather than the workers. (Boehner, 2002B) In the end, “[w]orkers will have full control over their investment decisions, not the advisor.” (Boehner, 2002C)
Democrat George Miller, a strong proponent for employee rights to control their investments in employer’s securities introduced H.R. 3657, the Employee Pension Freedom Act of 2002, on January 29, 2002. “Our bill provides employees the same pension rights as executives. It provides employees control over their own investments. And it protects employees from the kinds of executive abuses we saw in the Enron caseâÂ?¦The GOP bill fails to provide employees with the basic safeguards for their pensions that they must have in the post-Enron era.” said Representative Miller. (Miller, 2002A) Miller’s proposed bill, H.R. 3657, would help inform employees when company executives sell large amounts of company stock, encourage employees to diversify their 401k plan by informing them if they over-invest in company stock, require annual benefit statements, and help strengthen laws regarding managing employee investments. (Miller, 2002B)
The Employee Pension Freedom Act of 2002 was referred to the House Committee on Education & the Workforce on January 29, 2002. However, that committee has not yet reported on it. He was able to secure 78 co-sponsors but as a Democrat in a Republican-controlled House, he was unable to get support from his Republican colleagues. (H.R. 3657, 2002) In comparison, H.R. 2269, the Retirement Security Advice Act of 2001, received 58 co-sponsors (H.R. 2269, 2001) and H.R. 3762, the Pension Security Act of 2002, received 33 co-sponsors (H.R. 3762, 2002)
Republican Representative John A. Boehner first introduced the Pension Security Act of 2002, House of Representatives Bill #3762, on February 14, 2002. Republican Speaker Hastert referred it to the Education & the Workforce Committee, the Ways & Means Committee, and the Financial Services Committee. (H.R. 3762, 2002)
The primary committee involved was the Education & the Workforce Committee since this committee was influential in scheduling hearings for the Retirement Security Advice Act of 2001, which led to its passage in the House. The committee considered H.R. 3762, conducted a mark-up session, and amended the bill by a 28-19 vote on March 20, 2002. After this, the other two committees requested extensions for further consideration of the bill but both discharged it on April 9, 2002. After this, it was placed on the Union Calendar, Calendar No. 233. (H.R. 3762, 2002)
House Resolution 386 was created as special rules for the Pension Security Act of 2002 on April 10, 2002 by Republican Representative Pete Sessions. The House Committee on the Rules reported on an original measure, which is in House Report 107-396. The Committee on Education & the Workforce recommended an amendment that was printed in H.R. 3762; the amendment was a substitute in part A of the report of the Committee on the Rules. This was placed on the House Calendar, Calendar No. 136. (H. Res. 386, 2002)
Special rules for considering H.R. 3762 included 2 hours of general debate and no intervening motions were allowed except motion to recommit with or without instructions. Ranking members and chairpersons of the Committee on Education and the Workforce and the Committee on Ways & Means received equally divided time for the two-hour debate. (H.R. 3762, 2002) The amendment recommended by the Committee on Education & the Workforce was printed in H.R. 3762 and was a substitute printed in part A of the Committee on Rules report. A specified amendment was required for a representative to speak and it must be in accordance with the modified closed rule. (H. Res. 386, 2002) The modified closed rule means that the amendment must be germane to the legislation. (Salka, 2002A)
On April 11, 2002, roll call 87 was a vote to support H.R. 3762, the Pension Security Act of 2002, which was agreed to, by a 218-208 vote. All Republicans voted for the consideration of the bill while all Democrats voted against it. The Republicans were able to control the bill because they were the majority party in the House and they were united together in support of the bill. (R.C. 87, 2002)
Roll Call 88 was a vote calling for agreement to the resolution to consider House Resolution 386 as a rule to the Pension Security Act of 2002. It was first agreed to by a voice vote but an electronic vote was done because of Democratic Representative Frost’s demand for a recorded vote. House Resolution 386 was passed by a vote of 215-209 on April 11, 2002. (H. Res. 386, 2002) After House Resolution 386 passed the House; the rule was named House Amendment 452 and amendment 001 of the H.R. 3762, which was agreed to by the House. (H. Amdt. 452, 2002)
Democratic Representative George Miller offered an amendment that was put into the public record as House Amendment 453, amendment A002 for H.R. 3762, on April 11, 2002. (H. Amdt. 453, 2002) Representative Miller’s amendment to H.R. 3762 went to a public record vote and was defeated by a 187-232 vote in Roll Call #90, which was mostly a partisan vote since Republicans did not want the bill to have the protections Representative Miller proposed. (R.C. 90, 2002) Representative Miller than moved to recommit the bill with instructions back to Education and the Workforce committee for modification. This was roll call #91, which was defeated by a vote of 204-212. (R.C. 91, 2002) The action of the Republican Party proves the correctness in Miller’s statement that, “Unfortunately, the Republican leadership will not even let us offer amendments to protect employees.” (Miller, 2002A)
H.R. 3762 was then called for passage as it stood, roll call #92, which passed by a vote of 255-163. Most Republicans voted in favor of passage of the bill while Democrats were more split on the issue. Only two Republicans voted against the bill while forty-six Democrats voted for the bill even though most of their fellow Democrats voted against it. (R.C. 92, 2002) These Democrats decided that it would be best to be in support of the bill since that is what their constituents at home would want.
A motion through a voice vote was then made to reconsider the Pension Security Act of 2002 that received no objections. H.R. 3762 passed the House on April 11, 2001 with a 280-144 vote. The bill was received in the Senate and referred to the Committee on Health, Education, Labor, and Pensions on April 15, 2002. (H.R. 3762, 2002)
The Republicans along with President Bush strongly support The Pension Security Act of 2002. They say that the bill “promotes diversification and sound investment adviceâÂ?¦makes employers more responsible during blackout periodsâÂ?¦ensures parity between senior corporate executives and rank-and-file workersâÂ?¦[and] promotes comprehensive disclosure of ‘blackout’ periods.” (Boehner, 2002A)
However, the Democrats say that H.R. 3762 fails to include basic reforms that are necessary to ensure that other employees do not lose their retirement savings as Enron employees did. It also allows a dangerous loophole that allows self-interested investment firms to serve as an advisor to employees for advice on their retirement savings. They claim that the bill leaves employees’ money locked into company stock for long periods and fails to create a way employees can recoup their life savings in court if company officials are charged with misconduct of their money. (Miller, 2002C) “The Republican leadership, once again, is selling out to special interests. It is refusing to hold executives accountable for their actions,” said Democrat House Minority Leader Dick Gephardt. (Gordon, 2002)
However, Republicans say that the Pension Security Act of 2002 would have helped Enron workers during the blackout period because it makes employers more responsible during these periods and prohibits senior executives from selling stock during these periods. They also claim that the Pension Security Act would have helped Enron employees since they had no ability to receive professional financial advice at their job. “Some of them [Enron workers] could have preserved their retirement savings if they had access to a qualified adviser who would have warned them in advance that they needed to diversify their investment portfolio.” (Boehner, 2002A)
It is likely that Congress will pass a compromise reform bill regarding retirement-savings with many more reforms since the bill goes from a Republican-controlled House to a Democratic-controlled Senate according to James Delaplane, Vice President of Retirement Policy for the American Benefits Council. (Block, 2002) The Senate most likely will pass legislation that will combine important features of the Retirement Security Advice Act of 2001, the Employee Pension Freedom Act of 2002, and the Pension Security Act of 2002. However the process that the Senate will be going through to pass this legislation will be very different than the process described in the House. It is important to remember that any legislation passed by the Senate, the minoritarian chamber, will be legislation that all senators must agree to compared with the House of Representatives, the majoritarian chamber, in which a simple majority of representatives is enough to pass legislation. (Salka, 2002B)
As we have seen in the path of the three bills: H.R. 2269, H.R. 3657, and H.R. 3762, not all legislation goes through the same process proving that the textbook definition for how a bill becomes a law is obsolete. We should instead look at the Sinclair model, which states that legislation does not have a predictable path. In actuality, supporters and opponents on a day-to-day basis dictate it. (Salka, 2002B)
References
Boehner, 2002A. Boehner, John. “FACT SHEET: Fact vs. Fiction: The Bipartisan Pension Security Act (H.R. 3762).” House Education & the Workforce Committee. http://edworkforce.house.gov/issues/107th/workforce/enron/factsheet1.htm. Accessed: 4/25/02. Boehner, 2002B.
Boehner, John. “Workforce Committee Approves Boehner Retirement Security Advice Bill: Bipartisian Legislation Helps Workers Manager their Retirement Savings.” News from the Committee on Education and the Workforce. Released October 3, 2001. http://edworkforce.house.gov/press/press107/hr2269100301.htm. Accessed: 5/6/02.
Boehner, 2002C. Boehner, John. “H.R. 2269 – Retirement Security Advice Act” Bill Summary. Committee on Education and the Workforce. http://edworkforce.house.gov/issues/107th/workforce/erisa/summary.html. Accessed: 5/6/02.
Block, Sandra. “House passes bill to boost retirement plan safety: Measure comes in wake of Enron pension mess.” USA Today. Money section. April 11, 2002 http://www.usatoday.com/money/general/2002/04/11/pension-reform-bill.htm. Accessed: 5/6/02. Gordon, 2002.
Gordon, Marcy. “House Votes to Tighten Rules: Accounting Industry Targeted.” Associated Press. CTNow.com. Hartford Courant. http://www.ctnow.com/templates/misc/printstory.jps?slug=hc%2Denronaccounting(. Accessed: 4/30/02.
H. Amdt. 386, 2001. “House Amendment 386: House Rules for H.R. 2269: Bill Summary & Status for the 107th Congress.” http://thomas.loc.gov/cgi- bin/bdquery/z?d107:HZ00386:. Accessed: 5/5/02.
H. Amdt. 387, 2001. “House Amendment 387: Substitute amendment to amend H.R. 2269: Bill Summary & Status for the 107th Congress.” http://thomas.loc.gov/cgi-bin/bdquery/z?d107:HZ00387:. Accessed: 5/5/02.
H. Amdt. 452, 2002. “House Amendment 452: House Rules for H.R. 3762: Bill Summary & Status for the 107th Congress.” http://thomas.loc.gov/cgi-bin/bdquery/z?d107:HZ00452:. Accessed: 5/5/02.
H. Amdt. 453, 2002. “House Amendment 453: Substitute amendment to amend H.R. 3762: Bill Summary & Status for the 107th Congress.” http://thomas.loc.gov/cgi- bin/bdquery/z?d107:HZ00453:. Accessed: 4/25/02.
H.R. 2269, 2002. “H.R. 2269: Retirement Security Advice Act of 2001: Bill Summary & Status for the 107th Congress.” http://thomas.loc.gov/cgi-bin/bdquerytr/z?d107:HR02269:@@@L&summ2=m&. Accessed: 4/21/02.
H.R. 3657, 2002. “H.R. 3657: Employee Pension Freedom Act of 2002: Bill Summary & Status for the 107th Congress.” http://thomas.loc.gov/cgi-bin/bdquery/D?d107:19:./temp/~bdyKmr:@@@L&summ2. Accessed: 5/2/02.
H.R. 3762, 2002. “H.R. 3762: Pension Security Act of 2002: Bill Summary & Status for the 107th Congress.” http://thomas.loc.gov/cgi-bin/bdquery/z?d107:HR03762:@@@L&summ2=m&. Accessed: 4/25/02.
H. Res. 288, 2001. “H. RES. 288: Resolution to consider H.R. 2269: Bill Summary & Status for the 107th Congress.” http://thomas.loc.gov/cgi-bin/bdquery/z?d107:h.res.00288:. Accessed 5/5/02.
H. Res. 386, 2002. “H. RES. 386: Resolution to consider H.R. 3762: Bill Summary & Status for the 107th Congress.” http://thomas.loc.gov/cgi-bin/bdquery/z?d107:HE00386:@@@L&summ2=m&. Accessed: 4/25/02.
Miller, 2002A. Miller, George. “4/11/02 Press Release – Republican Pension Bill fails to Protect Employee’s Retirement Savings. News from Congressman George Miller. 7th District”. http://edworkforce.house.gov/democrats/rel41102.html. Accessed: 5/2/02. Miller, 2002B.
Miller, George. “Summary of the Miller/Rangel Democratic Substitute – The Employee Pension Freedom Act of 2002 – Thursday, April 11, 2002.” House Committee on Education & the Workforce: Democratic Staff. http://edworkforce.house.gov/pensiondemsummary.html. Accessed: 5/2/02. Miller, 2002C.
Miller, George. “Talking Points Against Republican Pension Bill – Thursday, April 11, 2002.” House Committee on Education & the Workforce: Democratic Staff. http://edworkforce.house.gov/democrats/pensiontalkingpoints.html. Accessed: 5/2/02.
OMB, 2001. “Statement of Administration Policy: H.R. 2269 – Retirement Security Advice Act of 2001”. Executive Office of the President. Office of Management and Budget. Press Release 11/15/01. http://edworkforce.house.gov/issues/107th/workforce/erisa/hr2269sap.pdf. Accessed: 5/6/02.
R.C. 87, 2002 “Roll Call 87: On Ordering the Previous Question: Providing for the Consideration of H.R. 3762, Pension Security Act: Final Vote Results.” http://clerkweb.house.gov/cgi-bin/vote.exe?year=2002&rollnumber=87. Accessed: 4/25/02.
R.C. 88, 2002. “Roll Call 88: On Agreeing to the Resolution: Providing for the Consideration of H.R. 3762, Pension Security Act: Final Vote Results.” http://clerkweb.house.gov/cgi-bin/vote.exe?year=2002&rollnumber=88. Accessed: 4/25/02.
R.C. 90, 2002. “Roll Call 90: George Miller of California Substitute Amendment: On Agreeing to the Amendment: Final Vote Results.” http://clerkweb.house.gov/cgi-bin/vote.exe?year=2002&rollnumber=90. Accessed: 4/25/02.
R.C. 91, 2002. “Roll Call #91: On Motion to Recommit with Instructions: Pension Security Act: Final Vote Results.” http://clerkweb.house.gov/cgi-bin/vote.exe?year=2002&rollnumber=91. Accessed: 4/25/02.
R.C. 92, 2002. “Roll Call #92: On Passage: Pension Security Act: Final Vote Results” http://clerkweb.house.gov/cgi-bin/vote.exe?year=2002&rollnumber=92. Accessed: 4/25/02.
R.C. 442, 2001. “Roll Call #442: On Passage: Retirement Security Advice Act” Final Vote Results” http://clerkweb.house.gov/cgi-bin/vote.exe?year=2001&rollnumber=442. Accessed: 5/3/02.
Salka, 2002A. Salka, William. Professor of Political Science at Eastern Connecticut State University. Notes from class lecture concerning the process of passing a bill through the House during PSC 335: Legislative Politics class on 4/25/02 between 3:30pm and 4:45pm.
Salka, 2002B. Salka, William. Professor of Political Science at Eastern Connecticut State University. Notes from class lecture concerning the process of passing a bill through the House during PSC 335: Legislative Politics class on 4/18/02 between 3:30pm and 4:45pm.
