WASHINGTON — Consumer advocates say better disclosure of fees for 401(k) plans would lead to bigger retirement nest eggs for millions of Americans. But business groups Thursday made clear they would fight legislation that would mandate a comprehensive listing of all such expenses.
Too much disclosure, they argued, would overwhelm employees with unnecessary detail, raise expenses for plan administrators and ultimately fail to benefit retirees.
The requirements "are numerous, burdensome, complex and likely to increase participant confusion rather than enhance . . . knowledge," said Lew Minsky, an attorney testifying to Congress on behalf of major business groups, including the U.S. Chamber of Commerce, the Profit Sharing/401(k) Council of America and the ERISA Industry Committee, which represents employers on pension issues.
The disclosure proposals "would confuse most participants and possibly hinder rather than help them make investment decisions," Minsky added in testimony to the House Education and Labor Committee.
The target of their complaints was a bill by Rep. George Miller (D-Martinez), chairman of the education and labor panel, that would require 401(k) retirement plans to inform participating employees of every service fee charged to their accounts. These include the sales commissions and fees paid to the investment fund companies, insurance firms and benefits administrators that run employer-sponsored retirement plans.
Companies used to pay many of these expenses, but over the years they have increasingly shifted this burden to employees. Moreover, the fees are often hidden, The Times found in its 2006 "Retirement at Risk" series.
For example, some fund companies say they don't charge a penny to administer 401(k) accounts -- but they offer participants only "retail" funds with high investment management fees, not the lower-cost institutional funds available to big groups. In other cases the fees are simply never detailed in account statements.
Advocates of more detailed disclosures say that fees can take thousands of dollars out of an investor's returns over the years, undermining retirement security at a time when millions of families appear to be ill-prepared for the costs of old age.
Further, such expenses are reported inconsistently by different financial firms, they say, and even sophisticated workers can find it impossible to understand how they are being charged, or to compare their 401(k) program with other plans.
