House Committee Approves Bill to Require Disclosure of Hidden 401(k) Fees
WASHINGTON, D.C. – American workers would receive clear and complete information about fees that could be cutting deeply into their 401(k)-style retirement savings under legislation approved today by the House Education and Labor Committee.
By a vote of 29 to 17, the committee approved the 401(k) Fair Disclosure and Pension Security Act (H.R. 2989), which would help workers shop around for the best retirement investment options by providing information on how much in fees is taken from their retirement accounts. Current law does not require disclosure of certain fees, and even for fee information that is available, it can be difficult for workers to find and evaluate.
“It is beyond time that American workers have basic and clear information on costs and choices contained in their 401(k) plan,” said U.S. Rep. George Miller (D-CA), chairman of the House Education and Labor Committee. “The economic collapse has fueled Americans’ concerns about whether they will have enough savings to last them throughout retirement. This bill will give Americans a fighting chance to strengthen their retirement and increase our nation’s future economic security.”
Miller said the issue is particularly important given that increasing numbers of American workers are relying on 401(k)s to help them pay for a decent retirement. Roughly 50 million Americans now have a 401(k)-style plan. Past surveys have shown that more than 80 percent of workers don’t know how much they are paying in fees on their retirement savings accounts.
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.
Specifically, the version of H.R. 2989 adopted by the committee would:
- Require 401(k) plans to disclose fees in one dollar figure taken from participants accounts in a worker’s quarterly statement;
- Require 401(k) service providers and plan administrators to disclose fees charged on 401(k) plans broken down into four categories: administrative fees, investment management fees, transaction fees, and other fees;
- Help workers understand their investment options by providing basic investment information, including information on risk, return, and investment objectives;
- 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;
- Ensure that if workers get investment advice through their jobs, that advice be based on the workers’ needs – not the financial interest of those providing the advice;
- Provide adjustments to pension funding rules to ensure plans can weather the economic crisis without being forced to choose between cutting jobs or freezing plans.
For more information on H.R. 2989 and the effects of hidden fees on workers’ retirement savings, click here.
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