June 2007:

Increasing the SEC’s matching contributions to its employees’ retirement savings accounts would not only offer a significant benefit to SEC employees and their families, but it would also substantially strengthen the agency by helping it to achieve one of the primary goals of the 2002 Pay Parity legislation. NTEU is continuing to push for such an increase. However, SEC senior management so far has failed to assist the union with respect to this important issue, despite the fact that, during last year’s compensation negotiations with the union, the SEC included an increased match in its final offer, which was included in the Federal Service Impasses Panel’s (FSIP) final order on compensation.

When Congress passed the Capital Markets Fee Relief Act five years ago, it included “Pay Parity” provisions for the SEC, which were specifically intended to improve recruitment and retention. These provisions authorized the SEC to provide benefits to its employees comparable to those enjoyed by other financial regulatory agencies. It is thanks to the Pay Parity law, which NTEU fought hard to pass, that we earn higher salaries than the GS provides, pay less than most federal employees for health insurance, and receive free dental and vision insurance.

The missing piece is the supplemental retirement benefit that other financial regulatory agencies provide to their employees. For example, the Office of the Comptroller of the Currency (OCC) contributes an additional 3% of salary into a supplemental retirement plan for its employees, and the Federal Deposit Insurance Corporation (FDIC) matches up to an additional 5% of salary into a supplemental 401K plan.

During last year’s compensation negotiations with NTEU, the SEC took the position that creating such a new supplemental retirement plan might involve a “conflict of interest,” since the entity managing the plan would be regulated by our agency. To deal with this issue, the SEC included in its final offer a proposal to increase its matching contribution to employee TSP accounts instead. Such an increase would, however, require a change to the statute governing the TSP. The SEC committed to providing assistance to NTEU in obtaining that legislative change – a commitment that was reiterated to NTEU representatives as recently as late last year, during discussions about the development of a new performance appraisal system.

NTEU representatives have already met with Congressional officials to encourage them to pass a TSP match increase bill. While these officials have been supportive of such legislation, they have suggested that the SEC reconsider its opposition to simply instituting a supplemental retirement plan, which would not require Congress to pass a new law.

While the SEC’s objection to such a supplemental plan may seem reasonable on the surface, it does not withstand close scrutiny. After all, SEC employees have long enjoyed the right to invest with various regulated entities as individuals. Furthermore, the C, F, S and I Funds of the TSP program, in which SEC employees regularly invest their funds, are all managed by a regulated entity. If SEC employees can invest in TSP funds managed by a regulated entity, why can they not invest in a supplemental 401k plan managed by a regulated entity?

Moreover, to the extent that the SEC opposes creating a supplemental plan because it does not want to select the plan administrator, the agency could simply partner with another federal agency, such as the FDIC or OCC, to provide a plan without direct SEC management involvement. Such a partnership solution would work in essentially the same fashion as the TSP, alleviating even any possible appearance of a conflict of interest. In any event, the SEC should clearly articulate the reasons for its objection to the creation of a supplemental plan to assist NTEU in explaining to Congressional officials why a TSP match increase bill is required.

Indeed, at the least, the SEC should directly assist NTEU’s efforts to obtain passage of such a bill. Although it has been many months since senior SEC officials agreed that they would work with NTEU to pass such legislation, SEC employees nevertheless have seen no action on this front. To the contrary, despite NTEU’s repeated efforts to engage both Chairman Cox and Executive Director Ruiz on this matter, for many weeks they failed even to respond to the union’s communications about it, raising serious questions about the strength of their commitment to SEC employees on this issue. When NTEU finally did receive a response this week, it was a legalistic one in which the SEC failed to address the issues raised by Congressional officials regarding supplemental plans, and once again failed to offer any assistance on the legislative front.

Chairman Cox has recently stated that senior management is looking for ways that it can continue to improve the working environment for SEC employees. Assisting NTEU in the realization of a modest increase in the retirement match offered to SEC employees would marry this rhetoric to action.

Regulation of the securities markets requires dedicated, highly trained professionals. The Pay Parity legislation was intended to improve the SEC’s recruitment and retention of such individuals, who are able to receive significantly higher compensation in the private sector. For that reason, NTEU will continue to press ahead with its work, both within the agency and before Congress, to make the increased retirement match a reality. To the extent that SEC senior management is actually committed to such recruitment and retention, it should step up to the plate to support the union’s efforts.

by Chapter 293 President Greg Gilman