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On June 17, 2009, the House Education and Labor's Subcommittee on Health, Employment, Pensions, and Labor approved the 401(k) Fair Disclosure for Retirement Security Bill (H.R. 1984) and the Conflicted Advice Prohibition Bill (H.R. 1988). Both bills were approved on a party-line vote (13 to 8) and were sent to the full Committee for consideration.
401(k) fee disclosure bill
The 401(k) Fair Disclosure for Retirement Security Bill, sponsored by Rep. George Miller (D-CA), is designed to ensure that employees receive basic investment information, including information on risk, return, complete fees, and investment objectives before signing up for a plan. 401(k) service providers would be required to disclose to employers all fees assessed against the participant's account, broken down into four categories: administrative fees, investment management fees, transaction fees, and other fees. In addition, service providers would be required to disclose any financial relationships or potential conflicts of interest to plan sponsors. Under the bill, 401(k)-type plans that seek limited employer liability would be required to include at least one index fund in their investment line-up. The Department of Labor would be required to review compliance with the new disclosure requirements and impose penalties for violations.
Investment advice bill
The Conflicted Investment Advice Bill, sponsored by Rep. Robert Andrews (D-NJ), would provide for independent investment advice for participants and beneficiaries under individual account plans. The bill would amend ERISA to allow an individual account plan and a participant or beneficiary who controls the investment of such a plan's assets to receive investment advice from an independent investment adviser that is registered under the Investment Advisers Act of 1940 and meets certain other qualifying requirements.
The measure would prescribe requirements for an investment advice program and would prohibit a fiduciary of an individual account plan that permits a participant or beneficiary to direct the investment of assets in the individual account from appointing or contracting with an investment adviser that is not an independent adviser. Under the bill, an independent adviser, before providing investment advice, would be required to provide written notification informing the participant or beneficiary: (1) of the past performance and historic rates of return of investment options available to the plan, together with comparisons to relevant benchmarks; and (2) that the investment adviser is acting as a fiduciary of the plan.
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