By a vote of 29 to 17, the House Committee on Education and Labor on June 24 approved a bill that would mandate certain 401(k) fee disclosure requirements, and require that investment advice provided to employees regarding employer-sponsored retirement plans be independent and free of any conflict of interest. The 401(k) Fair Disclosure and Pension Security Act of 2009 (H.R. 2989) combines provisions of two other bills that were approved by the House Education and Labor’s Subcommittee on Health, Employment, Pensions and Labor on June 17 by votes of 13 to 8 along party lines. Those two bills are the 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984) sponsored by Rep. George Miller (D-CA) and the Conflicted Advice Prohibition Act (H.R. 1988) sponsored by Rep. Robert Andrews (D-NJ).

According to a press release issued by the House Committee, H.R. 2989 would do the following:

• Require 401(k) plans to disclose fees in one dollar figure taken from participants’ accounts in a worker’s quarterly statement;
• Require 401(k) service providers and plan administrators to disclose fees charged to 401(k) plan accounts broken down into four categories: administrative fees, investment management fees, transaction fees, and other fees;
• Provide basic investment information to employees, including information on risk, return, and investment objectives;
• Require plan administrators to offer at least one low-cost index fund to plan participants in order to allow participants to protect themselves against liability for participants’ investment losses;
• Require service providers to disclose financial relationships so companies that sponsor 401(k) plans can be made aware of conflicts of interest;
• Ensure that if workers are provided with investment advice by their employers, that the advice be based on the workers’ needs – not the financial interest of those providing the advice;
• Provide adjustments to pension funding rules to ensure plans can weather the economic crisis without being forced to choose between cutting jobs or freezing plans;
• Give the Department of Labor the authority to enforce these disclosure rules and impose fines if a service provider is in violation of these rules.

It is anticipated – but not certain – that this bill will next be considered by the House Ways and Means Committee before it is put to a full House vote. Stay tuned for any new developments.