Crain News Service
WASHINGTON -- A bill introduced in the Senate would greatly expand the liability exposure of pension plan sponsors for year 2000 computer problems.
The legislation, whose pension-related provisions could catch some employers by surprise, is aimed at solving Year 2000 computer problems. However, S. 2000 also would amend the Employee Retirement Income Security Act to create new responsibilities for pension plan fiduciaries.
The bill would place on fiduciaries the burden of assuring that the issuers of any securities in which the plan has invested are year 2000 compliant or are taking steps to minimize the risk of losses from the computer bug.
Sen. Robert Bennett, the Utah Republican who co-chairs the Senate's Special Committee on the Year 2000 Technology Problem, introduced the legislation late last month without fanfare.
The bill would require fiduciaries to determine that "the issuer of any security in which the fiduciary seeks to invest the assets of the plan has, or is taking, steps to substantially eliminate any year 2000 computer problem."
The bill also stipulates the plan fiduciary would have to determine the market on which the security is traded "is prepared to operate without any interruption" stemming from the year 2000 problem.
Fiduciaries that have banks, insurance companies or other entities handle pension investments also would be required to assure that those vendors are prepared for year 2000 problems.
The requirements would apply only to investments made on or after the date S. 2000 is enacted.
The U.S. Department of Labor cautioned pension plan administrators in February they needed to deal with year 2000 problems quickly and not "gamble on a last-minute technological fix."
In a statement, Sen. Bennett said, "Over $2 trillion in assets are held by pension funds. For those entrusted with the responsibility to protect those assets, it is vital that they consider the impact of the millennial date change on both the viability of the companies in which they invest, and the liquidity of the markets in which these investments are traded."
His arguments didn't impress industry observers. "This bill should be renamed 'The Y2K Guaranteed Recession Act,' " said Mark Ugoretz, president of the ERISA Industry Committee, Washington.
Mr. Ugoretz said the idea that a pension plan would have to determine that every security it held had been issued by a company or entity that had solved or taken steps to "substantially eliminate" the year 2000 problem would stop any investment by pension plans, including in government bonds.
"Under this bill, it doesn't seem likely that a company could invest in T-bills. The Treasury Department alone has not indicated that it will substantially eliminate any year 2000 problems," he said.
Chances the bill will become law are "relatively small," said Henry Saveth, a principal with William M. Mercer, Washington. It has no co-sponsors and has been referred to a committee that does not have jurisdiction over pension plans.