Miller Fee Bill Clears House Committee

The version of a 401(k) fee disclosure bill passed by a U.S. House committee Wednesday includes a controversial provision mandating that plan sponsors include an index fund in their investment lineup.

The House Education and Labor Committee approved H.R. 3185 by a 25 to 19 vote, according to a committee news release. The vote for the updated version of a bill by Representative George Miller (D-California), the panel’s chairman, fell along party lines (See Fee Disclosure Legislation Introduced in House).

Other provisions of the bill, according to the committee news release, include:

  • Requirement that 401(k) service providers and plan administrators provide complete disclosure of fees broken down into four categories: administrative fees, investment management fees, transaction expenses, and other charges;
  • Help for workers in understanding their investment options by providing basic investment information, including risk, return, and investment objectives;
  • Requirement that service providers disclose financial relationships so plan sponsors can make sure there are no conflicts of interest; and
  • Authority to the U.S. Department of Labor to enforce new disclosure rules and fine service providers who violate them (See EBSA Releases Proposed Revisions to Provider Fee Disclosures).

According to the announcement, the index fund provision is a prerequisite for plans to receive safe harbor protection against liability for participants’ investment losses.

“For too long, companies in the financial services industry have maintained a stranglehold on retirement savings that they didn’t earn and that don’t belong to them,” said Miller, in the committee announcement. “The purpose of this legislation is to take these hard-earned savings away from the special interests and return them to their rightful place – the retirement accounts of American workers. Workers are entitled to clear and complete information about their own savings.”

The announcement cited a recent Government Accountability Office (GAO) study that found that a 1% difference in fees can reduce retirement benefits by nearly 20%.

The Minority View

Representative Howard P. “Buck” McKeon (R-California), the committee’s ranking minority member, blasted the Miller bill, declaring that “federal red tape and cumbersome mandates could drive up costs for workers without providing the high-quality information they need.”

“There is broad-based agreement about the importance of providing workers with meaningful information about their retirement savings plans,” said McKeon, in a separate statement. “Unfortunately, that’s not what we voted on today. Rather than focusing on information consumers can use, this bill demands sweeping new reporting of information regardless of whether it’s needed or how much it costs.’

Among McKeon’s suggested amendments to the bill was to eliminate the unbundling requirement, which requires plan service providers to report the cost of individual services, even when those services are not available on an individual basis. “Despite bipartisan concern expressed about the harmful unintended consequences of this provision, the amendment was defeated,’ McKeon reported in the statement.

“Republicans are committed to putting quality information in the hands of workers saving for retirement. Rather than bogging down our voluntary, employer-based retirement system with duplicative and meaningless new mandates, we should refocus our efforts on an approach that empowers consumers, strengthens plans, and enhances retirement security,’ said McKeon.

404(c) Protection

According to a BNA report, the latest version of the index fund provision came from an amendment by Representative Robert A. Andrews (D-New Jersey), who is also chairman of the committee’s Health, Employment, Labor, and Pensions Subcommittee.

Andrew’s change, as approved, extends Section 404(c) protection to any individual account plan if the plan includes at least one investment option that meets three criteria:

  • an appropriate broad-based securities market index fund (or a combination of two or more such funds) and which in the aggregate, is diversified so as to minimize the risk of large losses;
  • which offers a combination of historical returns, risk, and charges that are likely to meet retirement income needs at adequate levels of contribution; and
  • which is described in the terms of the plan as offered without any endorsement of the government or plan sponsor.

The Miller statement about the bill is available here. The McKeon statement is available here.

More information about the latest version of the bill is located at