WASHINGTON — The Department of Labor has put the issue of enhanced 401(k) fee disclosure on its agenda, a move that could take some of the wind out of the sails of a legislative threat.
WASHINGTON — The Department of Labor has put the issue of enhanced 401(k) fee disclosure on its agenda, a move that could take some of the wind out of the sails of a legislative threat.
The Labor Department will “soon” seek comment on ways to “improve the current disclosures applicable to participant-directed individual [retirement] account plans,” according to a March 6 department news release. According to the release, a proposed regulation on new disclosure requirements could be published in the Federal Register later this year.
“We want to ensure workers receive meaningful fee and expense information that will help them make informed investment decisions,” Bradford P. Campbell, acting assistant secretary of labor, said in the department’s press release. Gloria Della, a DOL spokeswoman, declined comment on the timing of the announcement.
The announcement came a few hours after a House Education and Labor Committee hearing at which Chairman George Miller, D-Calif., said that he is likely to propose legislation aimed at ensuring that plan sponsors and participants understand what they are paying in 401(k) fees.
Circumvent Congress
Industry lobbyists would prefer that new disclosure requirements be established by the Labor Department, which they believe would be more open to industry suggestions than Congress.
“Anytime that you have Congress try to act, they go after it with a sledgehammer,” said Bill Sweetnam, a partner at Groom Law Group in Washington and a former benefits tax counsel at the Department of the Treasury. “With regulations, you have a chance to comment. Many times, with bills, there’s not as much of a chance to influence what the bill is going to say.”
Ed Ferrigno, vice president of Washington affairs for the Profit Sharing/401(k) Council of America in Chicago, said that deferring to the Labor Department “is absolutely the way to do it, because you have to be careful that you do it right.”
However, the Labor Department’s announcement won’t reduce the likelihood of legislation, said Thomas Kiley, a spokesman for Mr. Miller.
Mr. Miller scheduled the hearings because of concerns that plan participants are paying out more in 401(k) fees than they would if they were better informed about the assessments. “Inaction is probably not an option for this committee,” Mr. Miller said during the hearings.
“Today, because of weak disclosure rules, most workers don’t even know how much they are paying in fees.”
Rep. Howard McKeon, R-Calif., the committee’s ranking Republican, endorsed enhanced disclosure requirements, as long they won’t add to the confusion of plan participants. “We must resist the urge to overwhelm workers,” he said.
In testimony at the hearing, Matthew D. Hutcheson, an independent fiduciary based in Portland, Ore., said that conventional 401(k) plans pay management costs of 3% to 5% annually — more than is reasonably necessary, he said.
The American Benefits Council in Washington, which represents plan sponsors, supports some additional disclosure but is concerned that onerous new regulations could add to the costs of 401(k) plans and discourage their use, said its chairman, Robert G. Chambers.
