Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : The ENRON Scandal -- Ignore unavailable to you. Want to Upgrade?

To: Karen Lawrence who wrote (106)	1/11/2002 3:25:44 PM
From: pompsander	Read Replies (2) \| Respond to of 5185

Two issues on the Enron pension matters, and sorry, I am on the run so will try to fill this in later. First, while the Enron employees may have had a right to change investments in the 401(k) (don't know their plan's specifics) the key is Management was touting the strength of the company and saying "all is well" right through the change window BEFORE the stock crashed. Thus, the employees who believed management (who I think knew better about the company health than they let on) were trapped in their asset allocation while the stock totally cratered. However, management exercising options had no such hinderance. (this is my understanding of what happened - perhaps they had right to change options more often, but have not read so. Will try to check all this out.) Second, the defined benefit plan of Enron was amended a while back to integrate its benefit formula with either the 401(k) match in enron stock or some other plan.....I think. The journal ran a story on this, and I don't have time to find it. The point is, the enron decision on that plan DID harm the 401(k) participants by reducing their other source of retirmeent income. When Enron stock tanked, both plans took massive hits. The DB plan, as I undestand it, may not have enough assets to pay its promised benefits. If true, the Pension Benefit Guaranty Corporation will ensure the benefits, but up to certain limites. Long Term and older employees will get hit worst because their account balances and accruals would be greater. Don't underestimate the impact Enron managment had on the retirement of their employees. This is not a case of "they had a choice and they took it". Plan sponsors must by law act in the sole and exclusive benefit of the Plan participants. I don't think that happened here, but time and events will reveal all. Sunlight is the best disinfectent.