The Employee Savings Bill of Rights, H.R. 3669, empowers employees to take control of their retirement plan investments and gives workers substantial new rights to avoid over-concentration in the stock of their own company. By modifying the rules that apply to the 401(k) plans and Employee Stock Ownership Plans (ESOPs) of publicly-traded companies, the legislation provides workers with needed control over their retirement plan investments while preserving the opportunity for employee ownership. Through new diversification rights, new disclosure requirements and new tax incentives for retirement education, this legislation will help employees achieve retirement security through their 401(k) plans and ESOPs.

NEW DIVERSIFICATION RIGHTS 

• Employee Savings. The legislation prohibits companies from forcing employees to invest any of their own retirement savings (401(k) money) in the stock of the employer.
• Employer Matching Contributions. The legislation gives employees new diversification rights with respect to 401(k) plan matching contributions made in company stock. After three years of service with their company, employees would have the right to diversify out of 100% of the matching contributions that had been made in company stock. Employees would be able to reinvest these funds in other investment options provided under the plan. This change will prevent the long holding periods that some companies currently impose before employees are allowed to diversify out of company stock matching contributions.
• Other Employer Contributions. The legislation also gives employees new diversification rights with respect to employer contributions to 401(k) plans or ESOPs that are not matching contributions (so-called "non-elective" contributions). After five years of service with their company, employees would have the right to diversify out of 100% of the non-elective contributions that had been made in company stock.
• Protecting Stock Values. In order to avoid adverse effects on stock prices, these important new rights would be phased in.

NEW DISCLOSURE REQUIREMENTS 

• Advance Notice of Blackout Periods. The legislation requires companies to provide a notice to employees 21 days in advance of any significant period during which employees will be unable to trade among investment options in their retirement plan (so-called "blackout" periods). The notice is also required in advance of any period in which employees will be unable to take loans or withdrawals from their plans. This reform will ensure that employees have the opportunity to trade out of company stock (or any other investment option about which they may have concern) prior to commencement of a blackout period.
• Investment/Diversification Notice. The legislation requires companies to provide employees with an explanation of generally accepted investment principles (such as diversification) when workers first enroll in a retirement plan and annually thereafter. This notice will help employees understand the importance of diversifying their retirement plan investments.

NEW INCENTIVES FOR RETIREMENT EDUCATION 

• Pre-Tax Savings for Retirement Planning. The legislation provides a new tax incentive to help employees pay for the cost of retirement planning services. For the first time, employees will be able to pay for retirement advice and counseling on a pre-tax basis through the easy mechanism of payroll deduction. This new tax incentive will help many more employees obtain expert assistance when making their 401(k) investment decisions, and reinforce the importance of diversifying retirement account holdings.