An influential House committee today approved a comprehensive package of retirement legislation that includes a provision that would permit only independent financial advisers to counsel 401(k) participants on their investment decisions.
An influential House committee today approved a comprehensive package of retirement legislation that includes a provision that would permit only independent financial advisers to counsel 401(k) participants on their investment decisions.
The Committee on Education and Labor approved the bill, the 401(k) Fair Disclosure and Pension Security Act of 2009, by a vote of 29-17 this afternoon.
Today's bill merged two proposals that were introduced this year: one made by Rep. Rob Andrews, D-N.J., focused on conflicted investment advice, the other sponsored by the committee’s chairman, Rep. George Miller, D-Calif., would have required increased disclosure of fees and expenses in 401(k) plans. The new bill incorporates a proposal to provide corporate plan sponsors with temporary relief from making required contributions to their traditional defined benefit pension plans.
Mr. Andrews' proposal essentially would prohibit employers from hiring brokers or registered representatives to serve as investment advisers to participants in the 401(k) plans they sponsored.
"We think that investment advisers should only have one interest in mind, and that is the individual," he said during today's committee meeting.
Brokers whose compensation has the potential to be influenced by the advice they provide, he added, may not always put 401(k) plan participants' best interests ahead of their own.
Now that the bill has been approved by the Education and Labor Committee, congressional leaders are beginning discussions to determine what the next step in the process will be before the legislation goes to the full House for a vote, according to a spokesman for the committee.
Mr. Miller noted today that the bill is still a “work in progress.”
But if the proposed bill is ultimately enacted, it could effectively nullify a January ruling by the Department of Labor and the Bush administration which allowed brokers and reps affiliated with financial services providers to serve as 401(k) advisers.
“In the final hours of the Bush administration, the Department of Labor gave Wall Street a long-sought-after way to line their pockets at the expense of the account holder," Mr. Miller said during his opening remarks today. “They said that it's perfectly fine to recommend a product or investment because it will increase your income, not because it is the best for the worker."
"Well, it's about time that Wall Street stop viewing workers' 401(k) accounts like a gold deposit to mine."
