401(k) Fee Disclosure Bill Introduced by House Education & Labor Committee
401(k) Fee Disclosure Bill Introduced by House Education & Labor Committee: The House Education & Labor Committee has introduced the Fair Disclosure for Retirement Security Act of 2009, which would require 401(k) plans to clearly state all fees with the aim of helping workers shop around for the best retirement options.
Senator Tom Harkin (D-IA) today released the following statement after the House Health, Education, Labor and Pensions Subcommittee held a hearing on the 401 (k) Fair Disclosure for Retirement Security Act of 2009. Harkin is the author of similar legislation in the Senate and is a senior member of the Senate Health, Education, Labor and Pension (HELP) Committee.
Representative George Miller, a California democrat, and Representative Rob Andrews, a New Jersey democrat, introduced a 401(k) fee disclosure bill yesterday. If passed in its current form, a worker’s quarterly statement would be required to list total contributions, earnings, closing account balance, net return, and all fees subtracted from the account. The total fees taken out of the account would be disclosed as one number in dollars, not as a percentage of the account balance as they typically are now. “Especially during these troubling economic times, workers need to be able to account for every penny taken from their hard-earned savings,” said Miller, chairman of the house education and labor committee.
According to the Government Accountability Office, fees even a one percentage point higher can deplete retirement benefits by nearly 20% over the life of the 401(k) plan. In addition, a 2007 survey by the AARP found that 80% of participants didn’t know how much they were paying in 401(k) fees.
Service providers would also have to disclose any financial relationships or potential conflicts of interest to plan sponsors. The 401(k) Fair Disclosure for Retirement Security Act of 2009 would give the U.S. Department of Labor the authority to fine service providers who violate the rules.
As more and more people rely on 401(k) plans for retirement, it is crucial that consumers have all the information they need to make sound investment decisions. Employees should be told everything about what they pay in fees in a clear manner and an easily accessible format. Many people don’t realize that a small administrative difference, such as a single additional percentage point in pension plan fees over the 30 years that they are investing, can cut their final retirement account balance by as much as 25 percent. I will continue to fight to ensure workers have the knowledge they need to prevent their retirement accounts from being reduced by excessive fees.
