Results tagged “retirement security” from EdLabor Journal

The Wall Street Journal has an article today about how small 401(k) plans often pay big fees. In an effort to ensure transparency, the Committee passed the 401(k) Fair Disclosure and Pension Security Act of 2009 to the House floor in June of this year. This bill will help small business owners like Mr. Maccani:

Some small employers say that it’s difficult to get a handle on exactly what they pay in fees, and that it often requires digging through documents or calling the various parties involved.

Gordon Maccani, chief executive of Digital Telecommunications Corp., in Van Nuys, Calif., says he thought he was paying only $3,600 a year to a third-party recordkeeper to manage his company’s 15-year-old 401(k) plan, which has about $920,000 in assets and 38 participants.

But Mr. Maccani says he recently started reviewing his annual plan statements from Transamerica Retirement Services and noticed there’s an array of other fees paid out of assets, including a 1.2% “contract asset fee,” $8,500 in “charges and fees” and about $1,400 in partner distribution fees. He originally didn’t get a clear answer, he says, when he called the company to inquire. But Transamerica called Mr. Maccani and gave him a comprehensive fee breakdown after being contacted by The Wall Street Journal. The company is a unit of Transamerica Life Insurance Co., owned by Aegon NV, a multinational Dutch insurance firm.

Transamerica’s recently provided breakdown shows Digital Telecommunications’ 401(k) plan actually paid about $16,300 in fees last year.

We encourage you to read the entire article and learn more about the 401(k) Fair Disclosure and Pension Security Act of 2009.

Marketplace radio has a story about H.R. 2989, the 401(k) Fair Disclosure and Pension Security Act of 2009. It lays out the reasons for more transparency in 401(k) fees.

As 401ks continue to weaken in a rough economy, lawmakers are paying closer attention to what they can control: the buried fees. Over a lifetime, 401k fees can add up to a six-figures number.

No doubt 401ks have taken a beating in the economic downturn. Retirement plans have lost an estimated $2 trillion -- and that's brought more attention to the buried fees charged by 401k plans. Today, a House committee takes up legislation that would address those fees.

Here's Marketplace's Dan Grech.

Steve Kroft's story about retirement insecurity, especially among those 55-65 years old, ran on 60 Minutes last night. Mr. Kroft highlighted some of the concerns about 401(k)s as the primary source of retirement income. In doing so he interviewed Chairman Miller about the hidden fees in many 401(k) programs.

"There clearly has been a raid on these funds by the people of Wall Street. And it's cost the savers and the future retirees a lot of money that would otherwise be in their account, independent of the financial collapse," Rep. George Miller [D-CA] said.

Congressman Miller is chairman of the House Committee on Education and Labor, and a staunch critic of the 401(k) industry, especially its practice of deducting more than a dozen undisclosed fees from its clients' 401(k) accounts.

"Now you got a bunch of economic wizards jumping in and taking money out of your retirement plan, and they don't wanna tell you how much, you can't decipher it in simple English, and they're not interested in disclosing it, or having any transparency about it," Miller told Kroft.

"And most of the people that look at their 401(k)s have no idea that these fees are being taken out?" Kroft asked.

"No. Where would you find it? Where would you find these fees in this prospectus? You can look on any page you want, and when you're all done reading it, and you will find some of the fees and the commissions here, but you won't find them all, and I'll bet you won't find half of 'em," Miller said.

There are legal fees, trustee fees, transactional fees, stewardship fees, bookkeeping fees, finder's fees. The list goes on and on.

Miller's committee has heard testimony that they can eat up half the income in some 401(k) plans over a 30-year span. But he has not been able to stop it.

"We tried to just put in some disclosure and transparency in these fees. And we felt the full fury of that financial lobby," he said.

David Wray, a lobbyist for the 401(k) industry, says he favors disclosing the fees, but his partners in the financial industry don't.

Asked if he thinks most people know these fees exist, Wray said, "I think they know that there are fees. They don't know exactly how large they are."

"Why do you think the financial services industry is opposed to fee transparency?" Kroft asked.

"I don't know that they're opposed to it. I think the issue is that…," Wray replied.

"You don't think they're opposed to it?" Kroft asked. "You're a lobbyist in Washington, right? You know they're opposed to it. …George Miller hasn't been able to get a bill to the floor."

"I think they want to keep the systems as simple and not make changes. They like the way things are. And whenever you push people out of their comfort zones, you know, it's an issue," Wray replied.

"I mean, they're comfortable with the situation because they're making a ton of money or they have made a ton of money," Kroft said.

"Well, and their systems are set up in certain ways. You know, this is gonna be a big change," Wray replied.

Watch the entire 14-minute segment below:

This Sunday, 60 Minutes will air a segment on how the economic crisis is affecting workers’ 401(k)s and retirement security, featuring an interview with Chairman George Miller. 60 Minutes airs on CBS at 7 pm eastern.

View the brief clip previewing the segment below.

Rep. George Miller (D-Calif.) believes the many fees extracted from 401(k) accounts are adding insult to injury for millions of Americans whose accounts have been decimated by stock losses and whose retirements are now in jeopardy.

Miller talks to 60 Minutes correspondent Steve Kroft for a report on how the recession is affecting 401(k) retirement plans to be broadcast this Sunday, April 17, 2009.

"There clearly has been a raid on these funds by the people of Wall Street and it has cost the savers - and the future retirees - a lot of money that would otherwise be in their accounts, independent of the financial collapse," says Miller, the chairman of the House Committee on Education and Labor. The chairman also dislikes the hidden nature of the more-than-a-dozen fees that most Americans are not fully aware are being skimmed off their 401(k)s. "And I'll bet you won't find half of them here," he tells Kroft, holding out a prospectus from a popular mutual fund found in many 401(k) portfolios.

The various fees can include legal fees, trustee fees, transactional fees, stewardship fees, bookkeeping fees, sales fees, asset management fees, investment management fees, investment advisor fees, finder's fees and many more.

Miller has been trying to curb what he considers excessive fees. "We tried to just put in some disclosure and transparency in these fees and we felt the full fury of the financial lobby," he says. (From CBSNews.com)

Preserving and strengthening 401(k)s is nothing new for Chairman Miller and the Education and Labor Committee. In 2007, the Committee passed the 401(k) Fair Disclosure for Retirement Security Act of 2007 (H.R.3185). In late 2008, the Committee helped suspend a tax penalty for seniors who did not take a minimum withdrawal from their depleted retirement accounts in 2009, and in February held a hearing regarding how to strengthen worker retirement security.

Many of the issues Chairman Miller discusses in the 60 Minutes segment will be discussed at the Health, Employment, Labor, and Pensions Subcommittee hearing regarding the 401(k) Fair Disclosure for Retirement Security Act of 2009 at 10:30 AM on April 22, 2009.

You will be able to watch the live webcast here.