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Will government be liable if it moves to limit a workers' pension choices? | |||
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By DAVID MOON, Moon Capital
Management In a small town in Arkansas, there is a hypothetical retired couple. He is seventy-three years old and fishes or hunts almost every day. She is seventy-two and volunteers at the local library. They are millionaires ' wealthy beyond their wildest dreams. They have given thousands of dollars to local charities. Their children were the first in their family to attend college. It all happened because in 1972, they went to work for a small local retailer, Wal-Mart. Under new rules being considered by congress, you can forever kiss the notion of any future Middle America Wal-Mart millionaires' goodbye. This past week, I saw an interview with a former non-management Enron employee. (This is an actual person, unlike our hypothetical Wal-Mart retirees.) At one point, this gentleman had over $300 thousand in his 401(k). His retirement plan is now worth slightly more than four dollars. He wants someone to get his money back. The federal government, a bankruptcy judge, Enron executives; he doesn't care who gives him the money. He just wants what is rightfully his. Somewhat uncomfortably, he does explain to the interviewer that he had several options within his retirement plan. He freely chose to fully invest his funds in his employer's stock, rather than the mutual funds or even money market fund that were among his other choices. Until the collapse, he saw his fate as similar to that of the mythical retired Wal-Mart cashiers: he was going to be rich and his employer was the train he was going to ride up the mountain of wealth. If the Federal government is successful in limiting employees to investing only 10 percent of their retirement plan money in their employer's stock, what sort of lawsuit should they expect from the employees of the next Wal-Mart or Microsoft? These individuals would have a claim that government limitations prevented them from becoming millionaires. Will thousands of future employees complain that they lost millions of dollars they would have accumulated? What about the ten percent of an employee's retirement plan that is invested in company stock? If competition drives a company into bankruptcy, will the federal government hold hearings and require a legislative remedy? Would pension plan participants be allowed to invest 10 percent of their funds in the stock of companies for which they don't work? What about risky mutual funds? There are thousands of mutual funds that declined more than 50 percent in 2001. Who is responsible for a person's retirement planning? The individual, his employer or the government? Social Security was originally intended to be a safety net for indigent retirees ' not a primary retirement plan. Self-directed 401(k) plans promised to allow employee control over their own destiny. But the primary issue here is about property rights. Once money is deposited into a self-directed, fully - vested 401(k) plan, to whom do those assets belong? The participant, company or government? If it truly belongs to the employee participant, the company should not be allowed to prevent the sale of company stock ' and the government should not be allowed to prohibit its purchase. David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).
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