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October 28, 1996 12:00 AM

CLINTON, CONGRESS GET MEDIOCRE GRADES

Patricia B. Limbacher
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    WASHINGTON - President Clinton deserves a B- average for his work on pension issues, pension industry executives say.

    Overall, Congress wasn't as lucky, receiving a C+ average for its work during the past four years. But many gave Congress a solid A for finally passing pension simplification.

    (Pensions & Investments asked lobbyists and other Washington insiders to grade President Clinton and Congress.)

    Those interviewed downgraded the Clinton administration because:

    The president did not do enough to respond to the drop in new defined benefit plans.

    The administration put out fires where no real blaze could be found with its campaign against 401(k) fraud.

    Congress, too, failed to address the decline in defined benefit plans, those surveyed said. They also noted the 104th Congress' greatest pension accomplishment - pension simplification - was a hand-me-down from the 103rd Congress.

    What both the administration and Congress should have done in the past four years was a more "dramatic cleansing of the regulatory burdens that make it tough for employers to establish defined benefit plans," said James Klein, president of the Association for Private Pension and Welfare Plans, Washington. He gave both the president and Congress a B.

    Even so, the Clinton administration gets good marks because it 'raised the level of awareness about the importance of retirement policy issues and (it) accurately identified that retirement issues are of great interest to the American public," Mr. Klein said.

    Kudos for administration initiatives include:

    The Department of Labor's 1996 interpretive bulletin on investment education vs. investment advice for 401(k) plans.

    The department's 1996 in-house asset manager exemption, allowing plans with at least $250 million in assets to conduct certain transactions without red tape.

    The DOL's 1995 prohibited transaction exemption allowing General Motors Corp. to contribute $10 billion in stock and cash to its ailing defined benefit plan.

    Mark Ugoretz, president of the ERISA Industry Committee, Washington, said both the administration and Congress flunked addressing the need for adequate resources in retirement; in fact, both have been failing that exam for the past 10 years.

    "The great danger is that if we do not do something immediately, we're going to have the largest consortium of elderly poor in our nation's history," he said.

    "These next four years are the last opportunity they have to fix the system before it's too late."

    While many employers see the appeal of defined benefit plans, they are not going to create a plan that will be costly and cause s lot of headaches because of the administrative complexities involved, said Pam Scott, principal with Kwasha Lipton, L.L.C., Fort Wayne, N.J.

    Reducing regulations and lowering premium costs would be two changes that might change employer behavior in creating these plans, she added.

    Pension Benefit Guaranty Corp. Executive Director Martin Slate has been touting the advantages of defined benefit plans in speeches lately, but so far no incentives have been announced by the administration to help employers create such plans.

    "We appreciate Mr. Slate's recognition" to promote defined benefit plans, Ms. Scott said. But "there will be no change in (employers') behavior unless there is a reduction in regulations."

    Mr. Klein said in some initiatives, the administration took one step forward but two steps back. The administration's crackdown on abusive 401(k) plan sponsors and its battle alongside congressional Democrats against Republicans over pension reversions last year made matters worse rather than better.

    Mr. Ugoretz added that relative to the resources spent on the 401(k) crackdown on fraud campaign, finding $5 million in delinquent contributions was inconsequential.

    "Ideas put forth to grab headlines . . . have eroded workers faith in the security of their pensions," Mr. Klein said.

    While some observers saw the passage of pension simplification in the Small Business Job Protection Act of 1996 as the highlight of Congress' accomplishments, others saw it as a make-up exam that had to be taken over and over.

    Adrien R. LaBombarde, research actuary at Milliman & Robertson Inc., Vienna, Va., gave the 103rd Congress a C-and the 104th Congress a D for claiming victory on issues, including pension simplification, that were hand-me-downs from previous sessions.

    "I grade down somewhat because for the most part Congress was the body with the power to break the gridlock," he said. "I particularly question what happened to that fresh spirit that the new party-in-power vowed to bring to pension and institutional investment issues with the 104th Congress."

    But Congress did make positive strides that deserved plaudits, including:

    Its ban on states' taxation of retirement benefits.

    ts Retirement Income Steering Committee, an ad hoc bipartisan committee that hosted monthly brown-bag lunches to help congressional members and staffers understand and explore retirement income policies and issues.

    Although the Retirement Protection Act of 1994 was a major accomplishment to shore up funding problems for certain pension plans, many said it was hard to give the legislation high marks, mostly because revenue generated from the law is going to fund other provisions passed in the 1994 General Agreement on Tariffs and Trade.

    One of Congress' biggest blunders came late in the session this year when Sen. Barbara Boxer introduced a bill, which eventually died, that would have prohibited employer-directed plans from investing more than 10% of assets in company stock.

    Many said this was typical congressional reaction: addressing the problem of a small group that would have sweeping effects on the entire system.

    "Clearly there were abuses, but to create legislation that affects all defined contribution plans, would have created much larger problems," said Jim Kaitz, a lobbyist with the Financial Executives Institute, Washington.

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