House bill introduced on 401(k) fee disclosure

Legislation that would require that all fees be disclosed to 401(k) plan participants in simplified form is needed, most of the panelists at a hearing on the legislation today testified.
MAR 17, 2010
Legislation that would require that all fees be disclosed to 401(k) plan participants in simplified form is needed, most of the panelists at a hearing on the legislation today testified. “401(k) fee disclosure reforms are long overdue,” testified Mercer Bullard, founder of Fund Democracy Inc. of Oxford, Miss., a mutual fund shareholder advocacy organization. He is also assistant professor of law and the University of Mississippi in Oxford. “Under current law, figuring out your 401(k) fees is like trying to find a needle in a haystack, except the needle has been broken into three parts and has been put into three different haystacks,” Mr. Bullard said. Investment management fees are disclosed as a percentage of assets in plan prospectuses, administrative fees are disclosed in dollar amounts in Department of Labor Form 5500, and other account fees specific to participants are on quarterly statements, he said. The current system amounts to an “absurd patchwork of disclosure requirements,” Mr. Bullard said. The hearing by the House Subcommittee on Health, Employment, Labor and Pensions was held to discuss legislation introduced yesterday by Subcommittee Chairman Robert Andrews, D-N.J., and House Education and Labor Committee Chairman George Miller, D-Calif. The subcommittee is part of the Education and Labor Committee. Similar legislation was approved last year by the committee, and Sen. Tom Harkin, D-Iowa, announced today he is introducing a similar bill. Simplifying fee disclosure would allow plan participants to make better investment choices to reduce fees, which can substantially erode retirement savings over the long-term, Mr. Miller said. In the current volatile market, “You need to be able to hold on to every dollar possible,” he said at today’s hearing. In addition to disclosure of all fees, the bill also would require employers to offer a low-cost index investment option in order to be protected from liability. Most of the witnesses testifying at today’s hearing supported the legislation. “Providing plan fiduciaries and plan participants with additional targeted information about fees and expenses will promote better investment decisions and help 401(k) plans to better deliver retirement security to the American work force,” testified Kristi Mitchem, managing director and head of U.S. Defined Contribution at Barclays Global Investors NA of San Francisco. Republicans warned against attributing huge losses in 401(k) accounts solely to plan fees. “We do no one a service … to suggest the cataclysmic failure in our markets are no more a function of so-called hidden fees,” said Rep. John Kline, R-Minn. Most of the sharp drop in 401(k) assets are due to the decline in the market, he said. Requiring that fee disclosure by standardized and broken down into broad categories will not work for all 401(k) plans, testified Larry Goldbrum, general counsel of The SPARK Institute Inc. of Simsbury, Conn., which represents plan service providers. “We urge the committee to reconsider whether requiring disclosure through a one-size-fits-all solution is appropriate,” he said. “Not all fees fit into categories,” Mr. Goldbrum said.

Latest News

Farther debuts AI investment proposal tool for advisors to win clients
Farther debuts AI investment proposal tool for advisors to win clients

"Im glad to see that from a regulatory perspective, we're going to get the ability to show we're responsible [...] we'll have a little bit more freedom to innovate," Farther co-founder Brad Genser told InvestmentNews.

Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler
Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler

Former advisor Isaiah Williams allegedly used the stolen funds from ex-Dolphins defensive safety Reshad Jones for numerous personal expenses, according to police and court records.

Are you optimally efficient?
Are you optimally efficient?

Taking a systematic approach to three key practice areas can help advisors gain confidence, get back time, and increase their opportunities.

Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida
Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida

Meanwhile, Osaic lures a high-net-worth advisor from Commonwealth in the Pacific Northwest.

Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B
Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B

The deals, which include its first stake in Ohio, push the national women-led firm up to $47 billion in assets.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.