The House of Representatives approved legislation requiring all 401(k) fees to be disclosed in May. But Senate lawmakers dropped the 401(k) fee disclosure provisions of the American Jobs and Closing Tax Loopholes Act this week.
The House version of the bill would have required 401(k) service providers to list all fees subtracted from employee retirement accounts. 401(k) account holders would also have been provided with charts comparing the service and investment charges that could be levied based on each 401(k) investment option.
“It is unacceptable for the Senate to eliminate this key consumer protection for the 50 million Americans who have 401(k) plans,” says Rep. George Miller of California, the author of the regulation. “Once again, this just shows how the heavy hand of Wall Street trumps the concerns of hardworking Americans. At a time when America’s middle class has already lost their retirement savings because of the financial scandals, they shouldn’t also be losing out because of excessive or hidden fees.”
A Senate Finance Committee aide says Chairman Max Baucus of Montana believes the most effective way to protect consumers is to let the Labor Department complete its work before intervening with legislation. The Department of Labor is expected to issue new regulations about how service providers should disclose 401(k) fees this month.
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A few companies have begun disclosing 401(k) fees in anticipation of the Labor Department’s official announcement. Putnam Investments, for example, recently began providing information about the total cost of its 401(k) plans to employers, including investment management, servicing, advisory, and record keeping fees. Plan sponsors also receive breakdowns of how much each investment manager and service provider is paid for the services provided. The company plans to begin disclosing fund expense ratios and transaction fees to individual 401(k) participants in July. "Plan sponsors and participants need detailed, useful, actionable information to make the right decisions,” says Putnam president and CEO Robert Reynolds in a statement. “Transparency on fees can help plan sponsors identify the best value for their particular circumstances and plan participants understand the value that their plan provides them.”