On Wednesday, June 17th, the House Subcommittee on Health, Employment, Pensions and Labor approved regulations aimed at bringing to surface concealed 401(k) fees that are thought to be compromising the security of Americans’ retirement funds. The bill was chewed over by the Education and Labor Committee, resulting in a 29 to 17 vote to approve the bill.


Aims and Objectives of the 401(k) Fair Disclosure for Retirement Security Act of 2009:

1) To certify that workers receive basic investment information. This includes information on risk, return, complete fees, and investment objectives prior to signing-up for a plan.

2) To make it a requirement that all fees charged against a worker’s account are included in the account holder’s quarterly statement.

3) To obligate service firms to tell employers the fees workers are charged on all investment options into four categories: administrative fees, investment management fees, transaction fees, and other fees.

4) To obligate 401(k) plans to offer at least one low-cost index fund to plan participants in order to receive protection against liability for participants’ investment losses.

5) To obligate service providers to divulge financial relationships so companies that sponsor 401(k) plans can make sure there are no conflicts of interest.

6) To give the U.S. Department of Labor the authority to enforce new disclosure rules and fine service providers who violate them.


The creation of the 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984) is intended to assist workers in finding the preeminent selection of retirement choices. The bill hopes to make it mandatory for simple fees to be disclosed on investment options in employer’s 401(k) plans. At present, it is not required that all fees that workers pay are to be disclosed.

The chairman of the subcommittee, and co-sponsor of the bill, Rob Andrews, expressed his frustration by stating that workers are finding they are being charged fees.  That has contributed to the drastic loss of their life’s savings. He continues to state that there is no wonder that workers are losing faith and assurance in the system, and that the “lack of transparency in the 401(k) system is unacceptable and must end now.”

A shocking result from a recent study declares that more than two-thirds of workers with retirement plans rely exclusively on 401(k) type plans for their retirement.

Chairman George Miller of the fill committee expressed that lucid and comprehensive information on the fees should be made available to Americans as it is their entitlement.  He said he is pleased about the sense of urgency that the subcommittee has adopted.

The U.S. Government Accountability Office stated that even a minimal discrepancy in the fees that workers pay can result, if there are substantial anomalies in the 401(k) account balances of the workers. To put things into perspective they outlined that a “1 percentage point difference in fees can reduce retirement benefits by nearly 20 percent.” In 2007, a survey was carried out by the AARP that showed that approximately 80 percent of plan participants were unaware of the amount of fees that were taken out of their 401(k) plans.


More information on the 401(k) Fair Disclosure for Retirement Security Act of 2009 can be found at the following website:
http://edlabor.house.gov/blog/2009/04/401k-fair-disclosure-for-retir.shtml