WASHINGTON–A House panel Wednesday approved legislation that would mandate greater disclosure of fees charged by service providers and plan administrators of 401(k)s.
It is unclear when the House will consider the legislation, a pet project of Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee.
No companion bill is under consideration in the Senate.
Officials of the American Benefits Council lauded inclusion of provisions in the bill that would give employers greater flexibility in funding their defined benefit plans during a period of great economic stress. But ABC officials voiced concern with the 401(k) fee disclosure and investment advice provisions of the legislation, as have many insurance underwriters and agents since the committee began considering the bill in 2007.
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The bill, which the committee approved by a 29-16 vote, is H.R. 2989, the 401(k) Fair Disclosure and Pension Security Act.
It would require 401(k) service providers and plan administrators to disclose fees charged on 401(k) plans, broken down into 4 categories: administrative fees, investment management fees, transaction fees and other fees.
It also would require 401(k) plans to disclose fees taken from participants’ accounts in dollar figures in quarterly statements. In addition, it would mandate that if workers get investment advice through their jobs, the advice must be based on the workers’ needs–and not the financial interests of those providing the advice.
It also would call for plan administrators to offer at least one low-cost index fund to plan participants to receive protection against liability for participants’ investment losses, and it would make service providers disclose financial relationships that potentially might create a conflict of interest.
The defined benefit pension funding relief provisions in the legislation “will help alleviate some of this funding pressure by permitting companies using the spot yield curve for 2009 to be able to elect to use the segment rates for 2010,” according to James Klein, president of ABC.
It also would revise the effective date of the Internal Revenue Service funding regulations to apply to plan years beginning after Dec. 31, 2009.