Fee Disclosure Rides Along with Pension Relief

Apparently there’s more than pension fixes tucked away in that new jobs bill moving through the U.S. Congress.

The American Jobs and Closing Tax Loopholes Act (H.R. 4213), expected to be considered by the House this week, also includes provisions regarding retirement plan fee disclosure; provisions that are based on the 401(k) Fair Disclosure and Pension Security Act, according to a statement by Congressman George Miller (D-California), who authored that legislation that was subsequently approved by the Education and Labor Committee that Miller chairs last year.

“Guaranteeing the disclosure of hidden 401(k) fees will give Americans a fighting chance to strengthen their retirement and increase our nation’s future economic security,” said Miller in a press release. “We need to ensure that 401(k)s are run in the best interests of accountholders, not for the sake of boosting Wall Street’s bottom line. I would like to thank Chairman Levin and Congressmen Rangel and Neal for working with the Education and Labor Committee on these important provisions.”

The bill:,

  • 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

The bill also requires that:

  • 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 list total contributions, earnings, closing account balance, net return, and all fees subtracted from the account
  • workers “receive clear information on the name, risk level, and investment objective of each available investment option before enrolling in a 401(k) plan”
  • fees be disclosed for each investment option the employee invests, expressed in dollars or as a percentage

The bill would also make what Miller described as “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.”  Among other provisions, H.R. 4213 is an adjustment to the amount of time a plan can make up losses over time and relief on funding-level restrictions (see House Bill Carries DC Disclosure Requirements).