House Democrats held a hearing Wednesday to discuss legislation introduced this week that aims to improve 401(k) fee disclosure.
The Health, Employment, Labor, and Pensions Subcommittee of the House Education and Labor Committee introduced the 401(k) Fair Disclosure for Retirement Security Act of 2009 Tuesday. The bill is sponsored by Rep. George Miller, D-Calif., chairman of the Education and Labor Committee, and Rob Andrews, D-N.J., chairman of the Health, Employment, Labor, and Pensions Subcommittee. Similar legislation was introduced in April 2008.
Provisions of the bill include:
- Ensure that workers receive basic investment information, including information on risk, return, complete fees, and investment objectives before signing-up for a plan;
- Require that all fees – in one number – that are charged against a workers account to be included in the account holder’s quarterly statement;
- Require service firms to tell employers the fees workers’ are charged on all investment options into four categories: administrative fees, investment management fees, transaction fees, and other fees;
- 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; and
- Give the U.S. Department of Labor the authority to enforce new disclosure rules and fine service providers who violate them.
“During a time where American workers have already lost $2 trillion in assets due to last year’s market downturn, it is vital that employees have full access to clear information regarding their hard-earned retirement savings and financial security,” said Rep. Rob Andrews (D-NJ), chairman of the Health, Employment, Labor, and Pensions Subcommittee in a statement.
Kristi Mitchem, head of Barclays Global Investors US Defined Contribution business, said in a prepared testimony for Wednesday’s hearing that an improved disclosure regime allows for a clear comparison between plans, and that information allowing for such is often difficult to obtain given differing compensation methods for investments alternatives and the fact that investment fees are often bundled with administrative costs.