(FORTUNE Magazine) – If there's a consensus about anything in Washington, it's that 401(k)s have to be better protected. But beneath the accord, there are deep divisions. Democrats are eager to impose new restrictions, including placing a limit on how much of a single company's stock an employee can keep in a 401(k). President Bush and Republicans are reluctant to wade that deeply into the quagmire. "It's going to be a major debate," predicts Ed Ferrigno of the Profit Sharing/401(k) Council of America, "and the No. 1 issue in town."

The battle has brought out the biggest corporate guns. The National Association of Manufacturers and the U.S. Chamber of Commerce marshaled more than 60 trade associations to send an emergency letter to Congress urging restraint. Their Coalition on Employee Retirement Benefits warns against "letting an unprecedented event like the Enron collapse lead us to misguided and potentially damaging responses." They oppose any strict guidelines on employee investments and want to keep corporate strictures that dictate when employees can alter their 401(k) investments. "We don't think a case has been made to rewrite pension laws based on a single case of malfeasance at Enron," Ferrigno says.

A growing number of lawmakers disagree. Senator Jon Corzine (D-New Jersey) wants to cap at 20% the amount of a company's stock that can be kept in a 401(k). Congressman George Miller (D-California) would prohibit employers from penalizing employees who sell any part of their company's stock held in the 401(k)s. He would also end blackout periods when, for administrative reasons, workers are blocked from adjusting their portfolios. As Senator Paul Wellstone (D-Minnesota) asserts, "The federal government must ensure that these tax-favored plans are secure."

Few lawmakers would go that far, though many will embrace a House-passed measure that would encourage 401(k) owners to get better educated through pension managers' advice. Bet on a plan by Bush that would prevent executives from selling company stock during periods when employee sales are blocked. Employees will also be allowed to sell their company-matched shares sooner (Bush suggests after three years) and get earlier notice of blackouts. The President's proposals will help guide the debate, but the legislative meat grinder will be messier than you might expect.