Better disclosure of 401(k) fees sought in bid to bring them down

November 16, 1997|By BLOOMBERG NEWS

WASHINGTON -- Fund managers and analysts remain divided on whether the government should force better disclosure of the fees millions of Americans pay for the operation of their 401(k) retirement plans.

Some 25 million U.S. workers have set aside $1.8 trillion in 401(k) accounts, representing more than half of all employees engaged in private pension plans. Critics say workers savings are being eroded by "excessive or undisclosed fees" on many 401(k) plans.

"A robust economy and a booming stock market have resulted in double-digit returns for 401(k) and other types of retirement plans," Assistant Labor Secretary Olena Berg said last week at a Labor Department hearing on fee disclosure. The high returns may be "obscuring the fees paid" for investments, she said.

Currently, non-mutual fund retirement accounts don't have to disclose their operating fees for managing money. More disclosure, supporters argue, could bring fees down.

Stephen Butler of Pension Dynamics Corp. said yearly fees shouldn't exceed 1 percent of a plan's assets. Even that can be excessive, he said. For example, on a $10,000 account, savings could be reduced by $12,000 over 10 years, he said.

This is the first time the Labor Department has investigated whether 401(k) accounts need to be made more understandable to consumers. In addition to the hearing, the department is doing research project and an enforcement project that it says will help it determine if plan sponsors are meeting their fiduciary responsibilities.

Pub Date: 11/16/97

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