You may have missed this heading into Memorial Day weekend, but on Friday the House approved legislation that includes a provision to improve 401(k) transparency. This provision was part of H.R. 4213, The American Jobs and Closing Tax Loopholes Act of 2010.
More specifically, this legislation requires that:
- Before enrollment, workers be provided with basic investment disclosures for each investment option, including information on risk, return, and investment objectives.
- 401(k) service providers must disclose to employers all fees being assessed against a participant’s account, broken down into: plan administration and recordkeeping fees, investment management fees, and all other fees.
- Fees be disclosed for each investment option, both in terms of dollars amounts and percentages.
- A workers quarterly statement list total contributions, earnings, closing account balance, net return, and all fees subtracted from the account.
What do you think? As far as I’m concerned, more information is better. Currently, federal law does not require this sort of disclosure. Hopefully, this sort of improved transparency will bring lower fees.
Update: Assuming this makes it through the Senate unscathed, it would “apply to plan years beginning after December 31, 2011.” In other words, it will be about 1.5 years before it goes into effect.