Sens. Tom Harkin (D-Iowa) and Herb Kohl (D-Wis.) have reintroduced legislation, the Harkin/Kohl Defined Contribution Fee Disclosure Act of 2009, that would require 401(k) plan providers to clearly disclose all of the fees they charge. The senators cite AARP research that shows if a 35-year-old invested $20,000 in a 401(k) plan over 30 years that yielded 6.5% a year and cost 0.5% in fees, their remaining balance would be $132,287, but if the fees were 1.5%, they would have only $99,679, or 25% less.
It is absurd that millions of Americans rely on 401(k) plans for their retirement security and yet they arent told what fees they are paying to maintain these accounts, Harkin said. This bill will shed light on the 401(k) selection process and give Americans more control over their retirement future. In an economy with more and more defined benefit plans being slashed or frozen every day, it is vital that employees have access to all the information they need to maximize their retirement savings.
Kohl added: I believe there is a basic right for consumers to clearly know how much products and services are costing them. Disclosure is especially important in the case of 401(k)s, as the slightest difference in fees can translate into a staggering depletion in savings, greatly affecting ones ability to build a secure retirement.
The disclosure is also meant to help employers better assess and select 401(k) plans. Further, it would spell out all financial relationships between all of the parties running the plan, so that investors can spot conflicts of interest.