Full listing of 401(k) fees opposed

October 07, 2007|By Jonathan Peterson | Jonathan Peterson,Los Angeles Times

WASHINGTON -- Consumer advocates say better disclosure of fees for 401(k) plans will lead to bigger retirement nest eggs for millions of Americans. But business groups last week made clear they will fight legislation that would require 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 I. Minsky, an attorney testifying in Congress on behalf of major business groups, including the U.S. Chamber of Commerce.

The target of their complaints was a bill by Rep. George Miller, the California Democrat who chairs the House education and labor committee, that would require 401(k) retirement plans to inform participating employees of every service fee charged to their accounts.

Companies used to pay many of these expenses, but over the years they increasingly have shifted this burden to employees.

Advocates of more-detailed disclosures say fees can take thousands of dollars out of an investor's returns over the years, undermining retirement security.

Two Democratic senators, Herb Kohl, of Wisconsin, and Tom Harkin, of Iowa, are expected to introduce similar legislation later this month.

For example, the Government Accountability Office estimated that a $20,000 nest egg in a 401(k) account could grow to $70,555 at 7 percent interest if the management fees are 0.5 percent. But if the fees were 1.5 percent the savings would only grow to $58,400.

AARP estimated that over 30 years, the $20,000 would grow to $132,287 with the lower fee - but just $99,679 with the higher fee.

Jonathan Peterson writes for the Los Angeles Times.

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