Committee on Education and Labor - U.S. House of Representatives

Preserving and Strengthening 401(k)s and Retirement Plans

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In October 2008, the House Education and Labor Committee held hearings to examine how the financial crisis is affecting Americans’ retirement savings plans, including 401(k)-style and traditional defined benefit pension plans.

At the Committee’s first hearing the Congressional Budget Office testified that American workers have lost as much as $2 trillion in retirement savings in the last fifteen months. At the follow-up hearing, Chairman George Miller revealed that the U.S. Pension Benefit Guaranty Corporation said it lost at least $5 billion in stock investments during the last fiscal year through August, and invested a significant portion of its funds in mortgage-backed securities.

Especially in light of these recent losses, Chairman Miller wants to preserve and strengthen 401(k)s for Americans by:

  • Expose excess fees that Wall Street middle men take from workers accounts. Currently, millions of Americans are paying excessive 401(k) fees at the hands of Wall Street middle men who refuse to fully disclose and detail extra fees and charges paid by employees. This is wrong, especially in light of the dramatic losses faced by millions of Americans in their 401(k) plans this year. According to the GAO, even a difference of just 1 percentage point in hidden fees can drastically eat into a worker’s 401(k) account balance – by as much as 20 percent or more over a career. This 1 percentage point difference could cost a worker with a $20,000 account balance more than $12,000 in reduced savings over this time period.
  • Bring young and low-wage workers into the system at a higher rate through automatic enrollment for employers already offering 401(k)s. Unless employers more quickly automatically enroll new workers, nearly 40 percent of workers born in 1990 will have no 401(k)-style savings at all when they retire, according to the GAO. Current law allows employers to automatically enroll their workers in their companies’ 401(k)s but employers have been slow to enroll employees. Studies show that automatic enrollment can increase participation by as much as 35 percentage points. And even after 3-4 years, the vast majority of those automatically enrolled are still participating.
  • Ensure that retirement accounts have diversified investment options with low fees. Many 401(k) plans have inadequate, and all too often, expensive investment options. Workers should have access to simple investment options, including low-cost index funds.
  • Ensure workers have access to reliable independent investment advice. Too often, workers are given self-interested advice from financial advisors or money managers – advice that may not always lead to the best retirement investment. All plan participants should have access to objective advice and investment information to help them better manage their savings.
  • Reduce vesting periods and improve portability of 401(k) accounts. Workers are leaving millions of dollars on the table because of employers’ rules that take away their savings when they change jobs. In many cases workers are required to work at a firm for three years or more before they can fully access their retirement savings. In addition, the GAO says that by automatically rolling over accounts into a new retirement plan when workers leave a job, Americans’ retirement savings would increase by a projected 11 percent on average, with the biggest percentage increases for low-income workers.

The Committee will continue to look for ways to preserve and strengthen 401(k)s and other retirement plans in preparation for the next Congress.


Under Chairman Miller’s leadership, the House Education and Labor Committee has held several hearings to examine how to strengthen retirement security in the wake of the nation’s financial crisis. The Committee has heard from retirement plan experts, retirement plan investment advisors, and retirees who have recently lost considerable portions of their savings in the volatile market.

On October 10, Chairman Miller and Rep. Rob Andrews (D-NJ) called on U.S. Treasury Secretary Henry Paulson to suspend the tax penalty for retirees who are forced to make withdrawals but want to have additional time to rebuild their retirement savings. More information on their letter to Paulson »

Earlier in 2008, the Committee passed legislation introduced by Chairman Miller to help workers shop around for the best retirement investment options by providing complete information on the fees taken from their retirement accounts. More information on that bill, the “401(k) Fair Disclosure for Retirement Security Act" (H.R. 3185) »