More voices are joining the discussion of how best to disclose the costs of 401(k) plans to the employees who participate in those plans, according to Financial Week.
Rep. Richard Neal, D-Mass., a member of the House Ways and Means Committee, confirmed that he is considering proposing 401(k) fee disclosure legislation.
Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, submitted a 401(k) fee disclosure measure in late July.
And the Department of Labor has several projects underway that relate to 401(k) fee disclosure.
Mr. Neal cited the issue’s tax angle.
Given the favorable tax treatment accorded to 401(k) plans, “we’re examining the whole responsibility that the Ways and Means Committee has here,” he told Financial Week late last week.
“We’re looking at the tax side of this issue.”
Charles Rangel, D-N.Y., chairman of the Ways and Means Committee, had announced in late July that the committee would hold a hearing on 401(k) fee disclosure later this year.
The date for that meeting has not yet been set.
“The full committee, based on Mr. Rangel’s comments, will be holding a hearing and there will be an opportunity for us, working with the consumer groups and 401(k) plan administrators, to see if we can’t draft legislation that does a better job of revealing what real fees are,” Mr. Neal said.
Mr. Neal would not comment on reports that he will propose legislation that is more to plan sponsors’ liking than Mr. Miller’s measure. Groups representing employers have objected to the level of detail that Mr. Miller’s bill requires to be disclosed, as well as its mandate that every 401(k) plan include an
index fund in its menu of investment options.
Bill Sweetnam, a principal with Groom Law Group and former benefits tax counsel at the U.S. Treasury, said that Mr. Miller’s and Mr. Rangel’s committees both have jurisdiction, given that 401(k)s are governed by both ERISA and the Internal Revenue Code.
But Ways and Means’ tax perspective may provide a more effective means of enforcing disclosure rules, Mr. Sweetnam said.
“One of the things that [Mr.] Neal could do would be to draft a bill that had tax provisions that put the teeth behind a prohibited transaction,” Mr. Sweetnam said.
He noted that the concept of prohibited transactions is common ground for ERISA and the Internal Revenue Code. “If somebody fails to provide an appropriate disclosure to a plan sponsor, that would be considered a prohibited transaction,” Mr. Sweetnam said. “Under the tax rules, with prohibited transactions, you have a tax that is paid.”
