401(k) Fee Disclosure and Pension Funding Provisions of H.R. 4213

By
Kittredge, Betsy Miller
on May 21, 2010 1:09 PM
Protecting Americans’ Retirement Security

A majority of American workers rely on 401(k)-style plans to finance their retirements. Most account holders report that they do not know how much Wall Street middle men are taking from their retirement accounts. Just a 1-percentage-point in excessive fees can reduce a worker’s 401(k) account balance by as much as 20 percent or more over a career.

Workers should have the right to know how much Wall Street intermediaries siphon off from their savings. Provisions included in H.R. 4213 regarding fee disclosure were based on the 401(k) Fair Disclosure and Pension Security Act, which was authored by Chairman Miller and approved by the Education and Labor Committee last year. Specifically, these provisions:

Require Simple and Complete Fee Disclosure to Workers

* Before enrollment, workers would receive information to help them understand  investment options by providing basic investment disclosures, including information on risk, return, and investment objectives
* A worker’s quarterly statement would be required to list total contributions, earnings, closing account balance, net return, and all fees subtracted from the account

Help Workers Understand Their Investment Options

* Workers would receive clear information on the name, risk level, and investment objective of each available investment option before enrolling in a 401(k) plan
* Disclosure of fees for each investment option the employee invests, expressed in dollars or as a percentage

Requires Complete Disclosure to Employers of Fees

* Requires 401(k) service providers to disclose to employers all fees assessed against the participant’s account, broken down into three categories: plan administration and recordkeeping fees, investment management fees, and all other fees
* Requires the U.S. Department of Labor to review compliance with new disclosure requirements and impose penalties for violations

Provide Important, But Modest Funding Relief for Single and Multi-Employer Plans

* Provides important, but modest adjustments to funding requirements so plan sponsors will not have to choose between making forced cash contributions, freezing plans or cutting jobs
* H.R. 4213 makes simple adjustments to the amount of time a plan can make up losses over time and relief on funding-level restrictions, among other provisions
* Funding relief provisions will save taxpayers $2 billion.