Labor Secretary Elaine Chao said late Wednesday that the department has opened an investigation into Enron Corp. for potential mismanagement and abuse of the pension fund plans of existing and former company employees in the wake of the Houston-based energy trader’s financial meltdown.

In a prepared statement, the Labor Department said Enron employees lost an estimated 70% to 90% of their pension benefits after the company re-stated its third quarter earnings. “Enron’s employees have gotten the short end of the stick in the sudden collapse of this company, and we are committed to doing everything we can to help them,” Chao said. The department’s Pension and Welfare Benefits Administration (PWBA), a quasi-federal agency, is reviewing Enron’s benefits plans, the rules that govern them, and steps that were taken by the company shortly before its collapse to temporarily freeze trading of 401(k) plan assets. This action is being closely coordinated with the Securities and Exchange Commission’s investigation into Enron, according to Chao.

In response to the sudden layoffs at Enron, the Labor Department and the Texas Workforce Commission have set up rapid response teams to provide orientation sessions for the affected workers, informing them how to sign up for unemployment insurance benefits and receive free job training and other services. After filing for Chapter 11 bankruptcy over the weekend, Enron laid off 4,000 employees and put another 3,500 on temporary leave. Labor also has activated its toll-free hotline, 1-877-US2-JOBS, to take calls from laid-off Enron employees and direct them to nearby one-stop re-employment centers. In addition, Enron employees with questions about their employee benefit plans can call the PWBA’s Dallas office at 214-767-6831, or go to https://www.dol.gov/dol/pwba.

Labor’s PWBA has the authority to conduct civil investigations of complaints alleging violations of the Employee Retirement Income Security Act (ERISA), which was passed by Congress in 1974 to protect individual pension fund plans (both profit sharing and 401(k) plans) and welfare plans.

The PWBA has sole jurisdiction over Title 1 of the act that addresses the fiduciary responsibilities of pension plan administrators, requiring them to make investments that are in plan participants’ interests, to use prudence to protect a pension fund, and to ensure the diversification of a pension fund, said PWBA spokeswoman Rita Ford. The agency shares jurisdiction over the act’s other titles with the Treasury Department and the Internal Revenue Service.

Ford told NGI that “we’ve gotten lots of calls” from Enron employees seeking “clarification of the law” with respect to their 401(k) plans.

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