The Department of Labor's proposed rules on 401(k) disclosure are insufficient, claim critics who say the disclosure isn't to the right people.
"It's clear that the rules are inadequate because they fail to require disclosure of fees and conflicts of interest to workers," said Rep. George Miller (D-Calif.), chairman of the House Education and Labor Committee.
While the proposed changes aim to increase fee disclosure and the reporting of conflicts of interest, critics say the disclosures would be to plan fiduciaries and not to the employees who typically pay most of the overhead costs.
In July, Miller introduced legislation requiring fee disclosures directly to participants in 401(k) plans, but his proposal has not made it out of committee.
Congressional hearings and an investigation by the Government Accountability Office found that most plan participants are unaware of how much fees cost them. For example, an administrative fee of 1% can cost an investor a huge amount of money over time as the 401(k) account gets larger, far outpacing the administrative costs. Labor Department officials say the new rules could cost the industry $52 million the first year, with the expense gradually diminishing over time. The proposed rules will go through a comment period before they are revised or implemented. "We are working quickly to implement regulations that foster fair, competitive and transparent prices for services," said Labor Secretary Elaine Chao.
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