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House Takes First Steps Toward 401k Reforms

House Education and Labor Committee Chairman George Miller (D-Calif.) may propose legislation to force retirement savings system operators to provide more information about fees they charge workers investing in 401k financial plans.

At a hearing today, Miller — joined by Republicans, the Government Accountability Office and various industry experts — called for changes in how 401k investment plans are administered. The witnesses and lawmakers agreed on the need for additional transparency about fees paid to 401k providers by plan employers.

The problem, Miller said, is that these fees cut into the return that employees get on their investment. Those fees can have a “substantial impact on the size of the retirement nest egg,” he said. It is a “question of fairness” to the employee, he said.

Miller and the GAO also questioned whether sponsors and plan providers had worked out side deals that amounted to a conflict of interest, leading companies to adopt plans that did not provide the greatest financial benefit for its employees.

Miller told CongressNow that he wants more information about which fees providers take out of plans and explanation of what the Labor Department has done so far to change the system before offering his bill.

Miller is planning to hold additional hearings and may ask Labor Department officials to testify. “Inaction is probably not an option for the committee,” he said during the hearing.

However, disagreement surfaced at the hearing about exactly what information needs to made public.

Some Republicans, such as ranking member Rep. Howard McKeon (R-Calif.), worried that providing too much information, some of it possibly unnecessary, could make the implementation of these plans too complicated and risk confusing the purchaser.

The American Benefits Council, which represents retirement benefit providers, echoed that concern and testified that requiring too much information could raise the prices of these plans, leading employees to drop out.

Determining what information needs to be provided is “where the rubber meets the road,” said attorney Robert Chambers, testifying for ABC.

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