Sen. Herbert Kohl says he intends to introduce a 401(k) plan fee disclosure bill.
Kohl, D-Wis., talked about the bill, the Defined Contribution Fee Disclosure Act, here today at a hearing of the Senate Special Committee on Aging on plan fees.
Kohl will be introducing his disclosure bill with Sen. Tom Harkin, D-Iowa.
“Our bill will help shed some light on these fees by requiring complete transparency to both employers and participants,” Kohl said. “This will allow employers to be able to negotiate with pension fund managers in order to get the lowest possible fees for their employees.”
Sen. Gordon Smith, R-Ore., spoke of the dangers of overwhelming plan participants with too many details and of increasing plan sponsors’ costs.
Bradford Campbell, head of the Employee Benefits Security Administration, noted that different audiences have different disclosure needs.
Plan participants may need simple disclosures of fees, plan sponsors may need details they can use to compare different plans, and regulators may need help with deciding whether fees are reasonable and within the bounds of the law, Campbell said.
EBSA and the IRS will weigh in on the disclosure in a few weeks, when the final Form 5500 benefit plan tax form regulations are released.
Proposed regulations for other disclosure requirements should follow in the next several months, Campbell said.
Robert Chambers, who spoke at the hearing for the American Benefits Council, Washington, said coming up with a single meaningful fee disclosure number for plan participants would be difficult.
“A concern is giving the information in a vacuum,” in which participants see what they are paying but don’t understand what they are paying for, Chambers said.
But requiring use of a single number would “get the ball rolling,” said Mercer Bullard, a law professor at the University of Mississippi.
“What we’re trying to get to here is that [participants] are conscious of the fees and their impact on the bottom line,” Bullard said.
Bullard said disclosures should be expressed in dollar terms, not in terms of ratios.
“If I see an unexplained $10 charge on my bank statement, I find out what it was for,” Bullard said. And he continued consumers would likely do the same for charges on their 401(k) statements.