House Bill affecting Retirement Plan Participant Reporting

This week, the US House of Representatives subcommittee on Health, Employment, Labor and Pensions approved a bill that would require the Labor Department to impose penalties on retirement plan administrators that don’t fully disclose fees deducted from investors’ 401(k) accounts. The legislation would require that fees be broken down into four categories: administrative fees, investment management fees, transaction fees and “other charges.” The fees would also have to be “rolled up” into a single number for clarity.

Proponents suggest that the 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984) will help workers better evaluate their retirement options by requiring simple fee disclosure on the investment options contained in their employer’s 401(k) plan. Current law does not require all fees to be disclosed; and often the information can be difficult for workers to find and evaluate. Many 401(k) statements, for example have fees buried within other categories in the participant’s account summary. A practice I have advised retirement plan providers against for years. More at:

http://edlabor.house.gov/newsroom/2009/06/house-retirement-subcommittee.shtml

The committee also voted in facor of legistlatin that would allow independent financial advisers to provide investment advice to plan participants. The Conflicted Investment Advice Prohibition Act of 2009 (H.R. 1988) would restore federal safeguards that ensured that investment advice provided to workers on their employer-sponsored retirement plan be independent and free from any conflicts of interest. The investment-advice legislation would also allow an employee to receive investment information via a computer model. More at:

http://edlabor.house.gov/newsroom/2009/06/house-retirement-subcommittee-1.shtml

If passed, these regulations will have a fairly major impact on participant communications and require recordkeeping systems changes as well as design changes to 401k participant statements and reporting websites. Stay tuned!

Elizabeth