401(k) Fair Disclosure for Retirement Security Act

A majority of American workers rely on 401(k)-style plans to finance their retirements. According an AARP survey, the vast majority of account holders report that they do not know how much Wall Street middle men are taking from their retirement accounts.

These hidden fees can greatly reduce workers’ retirement account balances. In fact, just a 1-percentage-point in excessive fees can reduce a worker’s 401(k) account balance by as much as 20 percent or more over a career. Especially during these difficult economic times, workers need simple and complete information in order to make better educated decisions about their retirement plans.

Workers should have the right to know how much Wall Street middle men siphon off from their savings. The 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984) will provide workers with clear and complete information about the fees they are paying to help them make the best investment decisions for their future retirement security. (Click here to view the bill text) Specifically, H.R. 1984:

Requires Simple and Complete Fee Disclosure to Workers

Before enrollment, workers would receive clear and understandable information that lists both historical returns and all fees assessed on each investment option; and
A worker’s quarterly statement would be required to list total contributions, earnings, closing account balance, net return, and all fees subtracted from the account. All fees taken out of the account would be disclosed in one number, but the worker could request more detailed fee information from their plan administrator.

Helps Workers Understand Their Investment Options

Workers would receive clear information on the name, risk level, and investment objective of each available investment option before enrolling in a 401(k) plan.

Requires Complete Disclosure to Employers of Fees and Conflicts of Interests

Requires 401(k) service providers to disclose to employers all fees assessed against the participant’s account, broken down into four categories: administrative fees, investment management fees, transaction fees, and other fees; and
Requires service providers to disclose any financial relationships or potential conflicts of interest to plan sponsors.

Ensures Workers Have Access to at Least One Low-Cost Index Fund

Requires 401(k)-style plans that seek limited employer liability to include at least one index fund in its investment line-up. Index funds are less expensive and generally outperform actively-managed mutual funds.

Enhances Department of Labor Oversight and Protection