The Senate Finance Committee has removed a requirement that all 401(k) fees be disclosed to workers and employers from jobs legislation it is considering, putting the Senate at loggerheads with the House of Representatives, which passed jobs legislation containing a disclosure provision on May 28.
Senate Finance Committee Chairman Max Baucus (D-Montana) removed the disclosure requirement from the American Jobs and Closing Tax Loopholes Act of 2010, HR 4213, because he wants to give the Department of Labor (DOL) time to develop meaningful regulations to increase transparency in 401(k) plans, according to US News & World Report. The DOL is expected to issue new regulations about how service providers should disclose retirement plan fees this month, the report said. A later ruling by the department would specify exactly what information plan sponsors should provide to participants.
Rep. George Miller (D-California), the chief House sponsor of the regulation, was having none of this, calling the provision’s removal from the legislation “unacceptable.” On Wednesday, June 16, Miller, the chairman of the House Education and Labor Committee, issued a statement: “Every day, hardworking families make the difficult decision to set aside their earnings to provide for their retirement. The Senate should side with middle class Americans who want to know the facts about fees and charges that threaten their retirement savings.”
Matthew Hutcheson, an independent fiduciary and congressional expert, agreed. In a telephone interview on Friday, June 18, he said, “There’s no good reason for the Senate to leave out something that is so relevant and critically important for over 50 million Americans.” Hutcheson said the issue of financial reform, disclosure of conflicts of interest, and disclosure of costs and fees are all inextricably connected. “If the Senate is actually going to do what is best for the American people, then they can’t pick and choose which one of those they’re going to include in legislation. They are all relevant, they go hand in hand.”
A report in Pensions & Investments (P&I) indicated that mutual fund executives opposed fee-disclosure legislation, in part, because it would derail the Department of Labor’s efforts to set final fee-disclosure regulations for defined contribution plans. The proposed legislation “will simply delay implementation of disclosure reform because regulators will need to interpret the new provisions and draft proposals to implement them,” Paul Schott Stevens, the mutual fund industry’s Investment Company Institute’s chief executive, said in a May 21 letter to congressional leaders quoted in P&I.
Some senators appeared to buy this argument, the report said. However, P&I noted, others see the need for the legislation in order to give backbone to any new disclosure regulations and to cover providers not covered by Labor’s oversight authority.
At this point, it is too early to predict whether the final Senate jobs bill will omit the disclosure provision. Even if it does, supporters will have a chance to put it back in during the House and Senate conference to reconcile their versions of the jobs legislation before sending a final bill to the White House for the president’s signature.
Read a story about how HR 4213 will affect retirement plan sponsors from the archives of InvestmentAdvisor.com.
Michael S. Fischer ([email protected]) is a New York-based financial writer and editor and a frequent contributor to WealthManagerWeb.com.