Podcast Center
Video Center
Webcasts
Resource Center
Events
April 20, 2008 at 04:00 PM
A House committee on April 16 voted to approve legislation requiring increased disclosure of fees for 401(k) plans, despite objections that the bill is burdensome and may be impossible for plans to comply with.
The House Education and Labor Committee approved the legislation, which is known as the 401(k) Fair Disclosure for Retirement Security Act, or H.R. 3185, by a vote of 25 to 19.
“For too long, companies in the financial services industry have maintained a stranglehold on retirement savings that they didn’t earn and that don’t belong to them,” said Rep. George Miller, D-Calif., chairman of the committee. “The purpose of this legislation is to take these hard-earned savings away from the special interests and return them to their rightful place-the retirement accounts of American workers. Workers are entitled to clear and complete information about their own savings.”
If enacted, the legislation would require 401(k) service providers and plan administrators to provide disclosure of all fees involved, broken down into 4 categories: administrative fees, investment management fees, transaction fees, and other fees. Other provisions in the bill would require service providers to disclose any financial relationships to avoid conflicts of interest, and plans would be required to offer at least one low-cost index fund to participants.
The desirability of disclosure was acknowledged by the committee’s ranking minority member, Rep. Howard McKeon, R-Calif., but he said the legislation as drafted raised concerns regarding the disclosure requirements, particularly those for “bundled” services. The bill, McKeon noted, would require service providers to disclose the fees related to any single service provided as part of a “bundled” service contract, even if that fee is not available on an individual basis.
“”Providers are, in essence, being asked to fabricate information for the sake of disclosure even when that disclosure has no meaningful purpose,” he said. Later he compared the concept to asking an auto dealer to give pricing for the various components of a car. “You don’t get a price for the engine, the brakes or the gearshift because they are not for sale outside of the car,” he argued.
