As more and more investors rely on mutual funds through their companies’ 401(k) plans in preparing for retirement, regulators and rule makers have begun looking more closely at employer-sponsored retirement plans, according to The Wall Street Journal.

Last month, the Congress-controlled Government Accountability Office (GAO) issued a report stating that some 401(k) business practices “may not be in the best interest of investors.”

The report, which criticizes opaque fee disclosures and the use of more expensive non-institutional share classes, among other things, comes less than six months after the Pension Protection Act fortified the already powerful industry.

Since changes in the tax code first made room for the 401(k) plan, they have grown into a $2 trillion industry and all but replaced traditional pension plans. Forty-seven million American workers already use the tax-deferred savings vehicles to prepare to retirement, and with the advent of the automatic enrollment the new law allows, those numbers will only swell.

Not only do many 401(k) providers make information about fees hard for investors to find, according to the GAO report, but the federal Department of Labor, which is charged with regulating these plans, has failed to collect the data needed even to monitor them.

"The fees are not being disclosed, and if you don't know what fees are being charged, you can't know if the fees are reasonable,” said Jerome Schlichter, an attorney with St. Louis-based Schlichter, Bogard & Denton, who has brought a bevy of cases on behalf of employees, including one against Fidelity, claiming that 401(k) providers have failed to fulfill their fiduciary responsibilities. Fidelity has vowed to fight the suit.

Other criticisms of plan administration include companies using share classes meant for individual investors, rather than the lower-fee institutional counterparts and the charges for plan administration, including recordkeeping, being based on total assets, rather than a flat rate. While the graduated charges may appeal to those with low balances, investors who accumulate significantly larger balances pay significantly higher fees, even if they demand no greater services.

Another transgression, according to the GAO report, includes consultant fees. So-called “pay-to-play” deals rank among the most egregious offenses, because consultants, who are meant to choose the best investment option, instead often choose funds from the company that pays them the highest consulting fees.

U.S. Rep. George Miller (D-Calif.) has railed against the industry for what he sees as inadequate disclosure, and, citing the GAO report, called for increased scrutiny of the industry and protection against conflicts of interest. If such calls for change pay off politically, some speculate that the 401(k) industry could face the type of examination and regulation faced by the mutual fund industry following the market-timing and late-trading scandals. The result, ultimately, could be lower fees for investors.

“Unfortunately there are [employer] fiduciaries who fell asleep at the switch; there are brokers who will charge excessively high fees; and, there are plan providers who support of this,” said Fred Reish, an attorney in Los Angeles who specializes in retirement plan law.

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