A press release on Senator Harkin’s Web site said the Harkin/Kohl Defined Contribution Fee Disclosure Act of 2007 would require 401(k) plan providers to disclose all fees so that workers saving for retirement can make a fully informed decision about which plan is best for them.
The Defined Contribution Fee Disclosure Act would, according to the release:
- Increase the information given to employers who sponsor 401(k) plans so they would have a comprehensive list of all of the fees they are paying and reasons for the fees. This information would then be passed on to participants upon request.
- Require that participants be given information about the overall levels of fees when they choose investment options and on their quarterly statements. The pre-selection notice also would include information on historical returns, the level of risk, and basic investment guidance. The 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.
“It is absurd that millions of Americans rely on 401(k) plans for their retirement security and yet they aren’t told what fees they are paying to maintain these accounts,” said Harkin, in the release. “This bill will shed light on the 401(k) selection process and give Americans more control over their retirement future.”
“I believe there is a basic right for consumers to clearly know how much products and services are costing them,’ said Kohl, in the 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.’
Similar legislation was introduced in the U.S. House by Representative George Miller (D-California) in July (see Fee Disclosure Legislation Introduced in House).
The House Committee on Ways and Means held a hearing October 30 to determine whether workers’ retirement savings are being eroded by excessive and unnecessary administrative and investment fees assessed by pension plan providers (see Ways and Means Hears Testimony on Appropriateness of Plan Fees) and subsequently issued a call for public comment on the issue (see House Ways and Means Taps Public on Plan Fee Information Use).