Senator Says Enron Violated 401(k) Law, Should Pay

By: Susan Cornwell

Sen. Barbara Boxer charged on Tuesday that one-time energy giant Enron Corp. broke the law when it prohibited employees from divesting company shares from their retirement plans.

Boxer, a California Democrat, urged the government to send Enron a bill for tax benefits it accrued for its pension plan, and then distribute the money to Enron workers who lost huge sums when the company's stock price collapsed. She said she had written to the Internal Revenue Service and the Labor Department, urging them to enforce the four-year-old law she authored to protect workers from being too heavily invested in their employers' stock.

"They are going to have to pay back taxes, because they got the benefit of being a government-qualified pension plan", Boxer told Reuters. "They [the government] should enforce the law, they should disqualify the plan, and send them a bill," Boxer declared.

Enron spokesman Vance Meyer said the company, which on Sunday filed the biggest Chapter 11 bankruptcy case in history, would have no comment on Boxer's allegations. The sharp fall in the share price that led up to Enron's collapse was calamitous for thousands of its workers who had heavily invested in the company's 401(k) assets although their investment plan offered them 19 choices. Boxer's bill, enacted as part of the Taxpayer Relief Act of 1997, imposed new limitations on an employer's ability to require the investment of 401(k) elective deferrals in company stock. Enron shares closed on Tuesday at 87 cents on the New York Stock Exchange, up 48 cents, or 123 percent, from Monday's close but off 99 percent from their 52-week high of $84.88.

Boxer asserted that Enron fell afoul of the law when it blocked employees from selling company shares just before the company's disintegration. "They were forced, and my bill says you can't force them", she told Reuters. An aide to Boxer said Enron essentially became an employer-directed plan, covered by the law, when it told employees they could not move investments out of the company's stock. "It seems to me they ought to be liable for that and the support of people who counted on them for retirement should be first in line", Boxer said. Her letters were addressed to Labor Secretary Elaine Chao and Internal Revenue Service Commissioner Charles Rossotti.

"I believe Enron violated ERISA [the Employee Retirement Income Security Act] when it 'locked down' its pension funds, preventing employees from selling Enron stock held in their retirement accounts for several weeks", Boxer wrote.

Sen. Max Baucus, the chairman of the Senate Finance Committee, also said he was very concerned about the fate of the Enron workers who had invested in the 401(k) plans and had asked his staff to investigate whether there were any legislative remedies. "I've asked the staff to look at that. I've asked them to give me some ideas", the Montana Democrat said.

Boxer's original proposal four years ago was much tougher than what ultimately passed Congress. Her initial bill would have limited the proportion of company stock in 401(k)'s to 10% of total plan assets.

She said on Tuesday she was unsure whether any more legislation was needed now, although she acknowledged that legislation might be needed to decide how to distribute any back taxes paid by Enron. "I'm hoping the IRS can make that determination, but that may require legislation", she said.