Fee Disclosure Legislation Clears House Committee
In a recent party-line vote, Democrats on the Committee on Education and Labor approved a measure that would require 401(k) service providers and plan administrators to disclose fees to both plan sponsors and plan participants. These fees would be broken down into four components: administrative fees, investment management fees, transaction fees and other fees. Here is my guess of the definition of these fees:
1. administrative fees – fees paid to run the 401k
2. investment management fees – fees paid to the underlying investment accounts (i.e. mutual funds), could also be fees paid to the advisor if in the form of 12b01 fees
3. transaction fees – fees paid to the advisor or possible (if really transparent) fees for underlying fund transactions
4. other fees – probably also fees paid to the advisor
The Fair Disclosure for Retirement Security Act, introduced by the committeeâ€™s chairman, George Miller (D-Calif.), would also require plan administrators to include at least one low-cost index fund in their plan in order to receive liability protection for participants’ investment losses.
Opponents expressed concern about the government giving its imprimatur to a specific type of investment â€“ the low-cost index fund â€“ and opposed moving forward with legislation. The Department of Labor is currently addressing the disclosure issue by regulation.
Read more information on the Full Committee Markup of the H.R.3185 “401(k) Fair Disclosure for Retirement Security Act of 2007”. (Source: FPA This Week)