Representative Miller Introduces Fee Disclosure
Legislation
July 26, 2007 (PLANSPONSOR.com) - U.S.
Representative George Miller (D-California) has introduced
legislation that would require clear and complete information
about 401(k) fees be provided to participants.
The 401(k) Fair Disclosure for Retirement Security
Act of 2007 would also require 401(k) plan service
providers to clearly disclose all potential conflicts of
interest, so participants and sponsors can determine for
themselves whether service providers are acting in the
best interests of plan beneficiaries, according to
a
statement
on Miller's Web site.
Significantly, the measure would also force
401(k)-style plans to include at least one lower-cost,
balanced index fund in their investment lineup.
A discussion panel at PLANSPONSOR's recent Plan
Designs conference in Chicago said Miller was not only
focusing on fee disclosure and conflicts-of-interest
issues, but also on the revamping of permitted retirement
plan investments in large measure restricted to
traditionally less expensive index offerings (See
PD2007: CA Democrat Seen as Important Pension Player
).
Discussion panel member Steve Saxon told the audience
that a move by Miller to mandate low-fee funds would be
something they would need to watch out for.
"If it gets through,"
Saxon
, a Washington Employee Retirement Income Security Act
attorney, told the Chicago audience, "that would
be a big deal."
Miller's Thursday statement said the
legislation would:
-
Require plan administrators to disclose, in
clear and simple terms, all fees charged to plan
participants each year;
-
Help workers better understand their investment
options by providing more detailed information on
investment strategies, risks, and returns when they
sign up for their company's 401(k);
-
Ensure that all fees and conflicts of interest
are disclosed annually to employers who sponsor
401(k) plans; and
-
Enhance the Department of Labor's oversight of
401(k) plans.
The issue of excessive and undisclosed 401(k) fees
has come to the forefront since a number of lawsuits were
filed by St. Louis law firm Schlichter, Bogard &
Denton last year (See
PD2007: 401(k) Fee Suits: Fending Off
The Devil
).
Written in the format of a letter to Miller,
chairman of the House Committee on Education and the
Workforce, a recent Government Accountability Office
report said Congress should consider amending ERISA to
require all sponsors of participant-directed plans to
disclose fee information of 401(k) investment options to
participants in a way that facilitates comparison among
the options (See
GAO Urges Congress to Consider 401(k)
Plan Fee Disclosure
).
The report pointed out even small fees can have a
large impact on participants' retirement savings, and
said research has found 80% of participants in
401(k)-style plans do not know how much they are paying
out of their plan accounts in fees.
Industry Reaction
"While we believe that the Department (of
Labor) has ample authority and experience to issue
meaningful regulations without new legislation, ERIC
will review Rep. Miller's proposal to see if it is
consistent with the approach that will get the job done
in a timely and effective manner," said ERIC
President Mark Ugoretz in a statement.
"We are also concerned that the legislative
process may in fact delay rather than ensure the
issuance of new disclosure rules that employees and
employers need."
"Meaningful disclosure of 401(k) fees is
essential for both plan participants and sponsors to
make smart financial decisions, but any legislative
approach must first consider the tremendous value that
401(k) plans represent in today's retirement savings
world," Lynn Dudley, American Benefit
Council vice president, told reporters in Washington,
D.C. Thursday.
Rebecca Moore
editors@plansponsor.com