House Bill Would Add Disclosure Requirements to 401(k) Plans

April 22, 2009

House Education and Labor Committee Chairman George Miller (D-CA) has introduced the Fair Disclosure for Retirement Security Act of 2009 (H.R. 1984) that would require 401(k) plans to more clearly state all fees to help investors choose the most appropriate retirement options. The bill is nearly identical to the Fair Disclosure for Retirement Security Act of 2007 (H.R. 3185), approved by the Education and Labor Committee in April 2008.

The bill would cover ERISA plans such as 401(k)s. Similar 457 retirement plans are not bound by ERISA rules, but often track those rules in most circumstances as a matter of “best practices.”

The bill would require administrators to provide investors with information on administrative, investment management, transaction and other fees as well as disclosures on risks, returns and investment objectives before they enrolled in a plan. It would also require administrators to continue to disclose fees in quarterly statements.

Plan administrators would be required to offer at least one low-cost index fund. They would also be required to disclose all financial relationships so that plan sponsors can detect potential conflicts of interest. Full Committee consideration of the fee disclosure legislation could occur in the next several weeks. Sen. Tom Harkin, (D-Iowa), also announced today that he is introducing a similar bill.