Senator Tom Harkin (D-Iowa) and Senator Herb Kohl (D-Wisconsin), chairman of the U.S. Senate Special Committee on Aging, Thursday introduced the Defined Contribution Fee Disclosure Act of 2009, which would require DC plan sponsors to disclose fees so participants can make fully informed investment decisions.
According to a press release on the Special Committee on Aging’s Web site, the act would:
Increase the fee information required to be provided to sponsors of DC plans. This information would then be passed on to participants upon request.
Require participants to be given information about the overall levels of fees when they choose investment options and on their quarterly statement. The pre-selection notice would include other critical information for plan selection such as historical returns, the level of risk, and basic investment guidance. A quarterly statement would help people to understand over time how much they have paid in fees and help them to compare fees against returns.
Require disclosure of relationships between all parties with financial interest in the plan. The U.S. Government Accountability Office (GAO) found that, “labor and plan sponsors also may not have information on arrangements among service providers that could steer plan sponsors toward offering investment options that benefit service providers but may not be in the best interest of participants,” according to the press release.
“I believe there is a basic right for consumers to clearly know how much products and services are costing them,” said Kohl, in the press release. “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 build a secure retirement.’
Prior fee disclosure legislation was referred to the House Education and Labor Committee, but no action was taken (see “Miller Fee Bill Clears House Committee’).
The announcement said that on February 25, the Special Committee on Aging will hold a hearing to examine, among other things, 401(k) lifecycle or target-date funds.