Utility lineman Roy Rinard of Portland General Electric saw 22 years of retirement savings wiped out by the collapse of Enron Corp, Portland's parent.
Rinard, 54, is among the many employees who stand to lose at least US$850 million, according to one lawsuit filed in the case.
Enron shares in their 401(k) retirement accounts that were worth US$90 each a year ago are worth little more than US$1 today.
The demise of Enron is prompting regulators, lawmakers and some companies to rethink a practice that became common in the late 1990s: encouraging workers to channel savings into their own companies' stock.
"It looks to me that employees were given a big shaft," said Senator Paul Wellstone, a Minnesota Democrat. "I don't think the company gave their employees any straight information." Aside from Enron, the prospect that a slumping economy could decimate retirement assets makes for "a public policy issue crying out for attention," said Joshua Dietch, consultant at Cerulli Associates Inc, a Boston-based research firm.
Dietch said that of US$1.8 trillion in assets held in 401(k) retirement plans, 20 percent, or US$360 billion, is in the stock of employees' own companies.
Eli Gottesdiener, an attorney who has filed a suit against Enron on behalf of an employee in its 401(k) plan, said Congress needs to reform the Employee Retirement Income Security Act, the 1974 law that governs most private pension and benefit plans, to prevent a similar blowup recurring at other companies.
"The problem is that Erisa had the unintended consequence of operating as the company stock promotion act," Gottesdiener said.
He calls it "a gross error that Congress needs to fix." The evaporation of retirement savings has drawn sympathetic reaction from Capitol Hill; the House financial services committee, which has some jurisdiction over pension plans, has scheduled hearings on Enron's 401(k) problems.
The House shouldn't hesitate to root out what happened at Enron and overhaul the pension law, said Representative George Miller of California, the senior Democrat on the education and workforce committee.
"This is a rat hole," he said. "There is no shortage of issues for the workforce committee to get into, but it's shown no inclination to do so." Representative John Boehner, chairman of the House workforce committee, said that while he's considering hearings next year, he's reluctant to prevent companies from making 401(k) contributions in company stock.
In many cases, that stock may be more valuable than cash, the Ohio Republican said. Any change in the law "may hurt employees," Boehner said. "We might drive down the overall value of the 401(k)." While laws governing company pension plans, known as defined benefit plans, require they hold no more than 10 percent of assets in the company's own shares, Erisa imposes no such cap on 401(k) plans that are not controlled by the company.
Enron's 401(k) plan had 62 percent of its assets invested in its own shares.
Gottesdiener said Congress needs to impose a 10 percent company stock cap on all 401(k) plans -- whether or not they are controlled by the company -- and require companies to let employees sell shares they receive as matching contributions once they are fully vested in a plan.
According to Hewitt Associates LLC, a benefits consulting company, 34 percent of 401(k) plans require an employee to reach a certain age -- typically 50 or 55 -- before they can diversify out of the company's stock. Of plans surveyed, 19 percent permit no diversification at all.
At Enron, employees under 50 weren't permitted to sell shares received as matching contributions made by the company. All employees were locked out of the plan between Oct. 26 and Nov. 13 while it changed administrators.
Rinard and his wife had planned to sell some Enron shares when the price reached US$30 but were locked out of their account.
"We were stuck," said Rinard, who saw his retirement account balance fall from US$400,000 to about US$35,000. "Twenty two years of savings is just completely shot." Ken Kahloni, a former information and technology manager at Enron, lost US$75,000 in his 401(k). "I took a pay cut to work there two years ago, because I wanted to work for the `best company,'" he said, referring to Enron's description of itself.
Trusting the Company Many Enron employees accuse the company of letting employees lose savings while executives sold shares before the stock price fell.
A suit filed on Wednesday in federal court in Houston on behalf of New York-based Amalgamated Bank alleged that 29 Enron executives and directors, including former Chief Executive Jeffrey Skilling and Chairman Kenneth Lay, made US$1.1 billion from "massive insider selling" while concealing Enron's deteriorating condition.
"With our 401(k), it was Enron's job as our employer to look after our investment," Rinard said. "We trusted the company down to the very end."
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