Chairmen Miller, Andrews Introduce 401(k) Fee Disclosure Bill
WASHINGTON, DC – Leading House Democrats on 401(k) issues introduced legislation today that will provide American workers with clear and complete information about Wall Street fees taken from their 401(k)-style accounts. The Health, Employment, Labor, and Pensions Subcommittee of the House Education and Labor Committee will hold a hearing on the legislation Wednesday. The 401(k) Fair Disclosure for Retirement Security Act of 2009 (H.R. 1984) will help workers shop around for the best retirement options by requiring simple fee disclosure on the investment options contained in their employer’s 401(k) plan. Current law does not require all fees workers pay to be disclosed; and even for information that is available, it can be difficult for workers to find and evaluate.
“Especially during these troubling economic times, workers need to be able to account for every penny taken from their hard-earned savings,” said U.S. Rep. George Miller (D-CA), chairman of the House Education and Labor Committee. “Workers should be entitled to clear and complete information about their retirement security.”
According to recent data, more than two-thirds of workers with retirement plans rely solely on 401(k) type plans as their primary retirement vehicle. Where investment decisions were once made by professionals managing a traditional pension portfolio on behalf of workers, the responsibility of picking the right investments and implementing retirement savings strategies are left up to an individual account holder.
“During a time where American workers have already lost $2 trillion in assets due to last year's market downturn, it is vital that employees have full access to clear information regarding their hard-earned retirement savings and financial security,” said Rep. Rob Andrews (D-NJ), chairman of the Health, Employment, Labor, and Pensions Subcommittee.
According to the Government Accountability Office, even a seemingly small difference in the fees that workers pay can make an enormous difference in the overall size of their 401(k) account balance. A 1 percentage point difference in fees can reduce retirement benefits by nearly 20 percent. A 2007 survey by the AARP found that roughly 80 percent of plan participants were not aware how much in fees were taken out of their 401(k)s.
Specifically, the 401(k) Fair Disclosure for Retirement Security Act of 2009 would:
- Ensure that workers receive basic investment information, including information on risk, return, complete fees, and investment objectives before signing-up for a plan;
- Require that all fees – in one number – that are charged against a workers account to be included in the account holder’s quarterly statement;
- Require service firms to tell employers the fees workers’ are charged on all investment options into four categories: administrative fees, investment management fees, transaction fees, and other fees;
- Require plan administrators to offer at least one low-cost index fund to plan participants in order to receive protection against liability for participants’ investment losses;
- Require service providers to disclose financial relationships so companies that sponsor 401(k) plans can make sure there are no conflicts of interest; and
- Give the U.S. Department of Labor the authority to enforce new disclosure rules and fine service providers who violate them.
A similar bill (H.R. 3185) was approved by the committee in April 2008.
For more information on the 401(k) Fair Disclosure for Retirement Security Act of 2009, click here.
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