Launching the first in a series of hearings on the retirement system–particularly the 401(k)–Rep. George Miller (D-California), chairman of the House Labor and Education Committee, said February 24 that while 401(k)s in their current form will not provide sufficient retirement security for the vast majority of Americans, 401(k) plans, nonetheless, must be “preserved and strengthened” in the short-term.
“The current economic crisis has exposed deep flaws in our retirement system,” Miller said. “For too many Americans, 401(k) plans have become little more than a high-stakes crap shoot. If you didn’t take your retirement savings out of the market before the crash, you are likely to take years to recoup your losses, if at all.”
Strengthening the 401(k) system means rooting out hidden fees and conflicts of interest. In the last Congress, Miller proposed a bill that would require disclosure of 401(k) fees. “Wall Street opposed it,” he said. “The ferocity of Wall Street’s response to simple fee disclosure leads me to believe that they do not want 401(k) account holders to find out the billions they skim from Americans’ hard-earned savings.” All signs point to another such fee disclosure bill being introduced in this Congress, said ranking member Howard McKeon (R-California).
The Committee turned to its panel of witnesses for suggestions on how to fix the retirement planning system. John Bogle, founder and former CEO of Vanguard, suggested in his testimony that a single defined contribution plan for tax-deferred retirement savings be available to all Americans (with a maximum annual contribution limit), consolidating today’s traditional retirement plans–DC plans, IRAs, Roth IRAs, 401(k) plans, 403(b) plans, and the federal Thrift Savings Plan. He also said an annuity option “to minimize longevity risk” should be provided in 401(k) plans, and that the fiduciary standard of care that plan sponsors are held to should be extended to all investment managers.