Hidden 401-k Fees Threaten Retirement Security for Seniors Says Senate Aging Committee Chair

Sen. Kohl calls hearing today on devastating fees hidden in law

Oct. 24, 2007 - The Senate Special Committee on Aging will hold a hearing today on the devastating effect hidden 401(k) fees can have on retirement savings and the need for simple and clear disclosure. Chairman Herb Kohl (D-WI) says he will offer legislative changes.

 Although only established in the 1980s, 401(k) defined benefit plans have become the main retirement savings vehicle for most Americans, covering over 50 million people and exceeding $2.5 trillion in assets, according to Kohl’s office. 

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Under federal pension law (ERISA), there is no requirement for plan sponsors to provide participants with information on the fees associated with differing investment options. 

Because most fees are netted from their account balances, most plan participants are unaware of the costs of their plans. 

According to a study conducted in July of this year by AARP, only 17 percent of 401(k) enrollees knew that they were paying any fees.  Two-thirds of the respondents, or 65 percent, thought they paid no fees for their 401(k) plan. 

In conjunction with this hearing, Chairman Kohl and Senator Tom Harkin (D-IA) will introduce the Defined Contribution Fee Disclosure Act of 2007.

Scheduled to testify are:

  ● Barbara Bovbjerg, Director for Education, Workforce and Income Security Issues, U.S. Government Accountability Office (GAO)

Her testimony will state that the current law does not adequately require disclosure of fees and expenses, and offer insight into how best to present this information to consumers. 

  ● Bradford Campbell, Assistant Secretary of Labor, Employee Benefits Security, Administration, Department of Labor (DOL)

Campbell will discuss new regulations on disclosure DOL intends to propose.

  ● Jeff Love, Director of Research, AARP

Love will give an overview of AARP’s study on 401(k) fees. 

  ● Mercer Bullard, President/Founder, Fund Democracy; Professor, University of Mississippi School of Law

Bullard will testify as one of the nation’s leading advocates for fund participants.

  ● Michael Kiley, President/Founder, Plan Administrators Inc., representing the American Society of Pension Actuaries (ASPA) and the Council of Independent 401(k) Recordkeepers (CIKR)

Kiley, of De Pere, Wisconsin, will testify on behalf of the American Society of Pension Professionals & Actuaries (ASPPA) and the Council of Independent 401(k) Recordkeepers (CIKR). 

  ● Robert Chambers, Chairman of the Board, American Benefits Council

Chambers will represent the view of industry stakeholders.

The hearing opens at 10:30 a.m. in Room 628 of the Dirksen Senate Office Building. The proceedings will be Webcast and a link is available at:  www.aging.senate.gov. The Webcast is also available online after the hearing.