Transparency urged at 401(k) hearing

Legislation that would require complete transparency with regard to 401(k) fees for all participants is set to be introduced in the Senate this week. “There is a basic right for consumers to clearly know how much products and services are costing them,” Senate Special Committee on Aging Chairman Herb Kohl, D-Wisc., said today at a hearing on 401(k) fees. The Defined Contribution Fee Disclosure Act would enable employers to negotiate with pension fund managers to get the lowest possible fees for their employees, and would help lower costs by fostering competition among pension managers, according to a statement by Mr. Kohl. “Disclosure is especially important in the case of 401(k)s, as the slightest difference in fees can translate into a staggering depletion in savings, greatly affecting one’s ability to secure retirement,” Mr. Kohl said. Current law governing 401(k) fees does not adequately require disclosure of fees and expenses, according to Barbara Bovbjerg, director for education, workforce and income security issues at the Government Accountability Office, who testified at the hearing. Few fund participants pay adequate attention to fees charged for 401(k) plans, and there is a need for clear information on quarterly statements, testified Mercer Bullard, the founder of Fund Democracy Inc., a mutual fund shareholder advocacy organization. But “defined contribution plan fee disclosure must be addressed in a way that does not undermine participant confidence in the retirement system and does not create new costs,” said Robert Chambers of Charlotte, N.C., law firm Helms Mulliss & Wicker, speaking on behalf of the American Benefits Council of Washington. ABC represents large companies that have health and retirement benefit plans.