Miller introduces bill to expose 401(k) fees
By Josh Richman
Tuesday, April 21st, 2009 at 4:47 pm in George Miller, U.S. House.
House Education and Labor Committee Chairman George Miller, D-Martinez, today introduced HR 1984, the 401(k) Fair Disclosure for Retirement Security Act of 2009, which would require fee disclosure on the investment options contained in employers’ 401(k) plans.
Believe it or not, current law doesn’t require all fees that workers pay to be disclosed, and the information that is available can be hard for workers to find and evaluate. Having all those fees clearly detailed will help workers shop around for the best retirement options, Miller contends.
“Especially during these troubling economic times, workers need to be able to account for every penny taken from their hard-earned savings,” Miller said in a news release. “Workers should be entitled to clear and complete information about their retirement security.”
More on why you should care about those fees, after the jump…
As Miller noted at a field hearing last October in San Francisco, Americans have lost more than $2 trillion in retirement savings due to this recession. Recent data shows more than two thirds of workers with retirement plans rely on 401(k)-type plans as their main nest egg, meaning most Americans now make their own investment decisions rather than relying on professional pension portfolio managers.
The Government Accountability Office says even an apparently small difference in the fees can make an enormous difference in the overall size of their 401(k) account balance: a 1 percentage point difference in fees can reduce eventual retirement benefits by nearly 20 percent. And a 2007 survey by the AARP found roughly 80 percent of plan participants didn’t know how much in fees were being taken out of their 401(k)s.
This bill, co-authored by Miller and Health, Employment, Labor, and Pensions Subcommittee chairman Rob Andrews, D-N.J., would ensure that workers get basic investment information including information on risk, return, complete fees, and investment objectives before signing-up for a plan; require that all fees charged against a worker’s account be included in the account holder’s quarterly statement; 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 sponsoring 401(k) plans can make sure there are no conflicts of interest; and give the Labor Department authority to enforce new disclosure rules and fine service providers who violate them.
Andrews’ subcommittee will hold a hearing on the bill Wednesday. A similar bill, HR 3185, was approved by the committee in April 2008.
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April 22nd, 2009 at 6:57 am
This is a good start, but it won’t solve the problem of high costs and conflicts of interest.
Here is what I’m talking about: Congress needs to simplify 401(k) and 403(b) plans. For instance, it makes sense for employers to use a prototype plan document and Investment Policy Statement (IPS) that is designed by the DoL. That way we can cut out all of the middlemen such as ERISA attorneys, recordkeepers (Do we really need a recordkeeper? No! For instance, do you need one for your IRA? No!), investment advisers, and plan consultants.
My point is this: Can we finally agree that 401(k) and 403(b) plans are way to complicated for employers and employees to get the most benefit from? I hope so.
Your readers need to tell Congress to simplify 401(k) and 403(b) plans so that we finally get the middlemen out of our pockets.
April 22nd, 2009 at 10:29 am
Hard to believe this is not already law. It is very much needed. I totally agree with comment #1. Get rid of the middle people.
In my 401(k), all we have are mutual plans with high fees, and most with loads. The funds usually are rated poorly by Morningstar. But what choice do we have?
I (and others) have asked again and again for some low-cost funds (or better yet ETF’s) that just track a broad basket of stocks with very low fees. But somehow our “investment adviser” always gets us high cost options.