Preserving and Strengthening 401(k)s and Retirement Plans
Preserving and strengthening 401(k)s and retirement plans is a high priority of the Committee in the 111th Congress. Committee efforts to help Americans enjoy a secure retirement will
include: exposing excess fees that Wall Street middle men take from
workers' accounts, bringing young and low-wage workers into the system
through automatic enrollment, ensuring that retirement accounts have
diversified investment options with low fees, and much more.
Under Chairman Miller’s leadership, the House Education and Labor Committee held several hearings in 2008 to examine how to strengthen retirement security in the wake of the nation’s financial crisis. The Committee heard from retirement plan experts, retirement plan investment advisors, and retirees who have recently lost considerable portions of their savings in the volatile market.
Chairman Miller wants to preserve and strengthen 401(k)s for Americans by:
- Exposing excess fees that Wall Street middle men take from workers accounts.
Currently, millions of Americans are paying excessive 401(k) fees at
the hands of Wall Street middle men who refuse to fully disclose and
detail extra fees and charges paid by employees. This is wrong,
especially in light of the dramatic losses faced by millions of
Americans in their 401(k) plans. According to the GAO, even a
difference of just 1 percentage point in hidden fees can drastically
eat into a worker’s 401(k) account balance – by as much as 20 percent
or more over a career. This 1 percentage point difference could cost a
worker with a $20,000 account balance more than $12,000 in reduced
savings over this time period.
- Bringing
young and low-wage workers into the system at a higher rate through
automatic enrollment for employers already offering 401(k)s. Unless
employers more quickly automatically enroll new workers, nearly 40
percent of workers born in 1990 will have no 401(k)-style savings at
all when they retire, according to the GAO. Current law allows
employers to automatically enroll their workers in their companies’
401(k)s but employers have been slow to enroll employees. Studies show
that automatic enrollment can increase participation by as much as 35
percentage points. And even after 3-4 years, the vast majority of those
automatically enrolled are still participating.
- Ensuring that retirement accounts have diversified investment options with low fees. Many
401(k) plans have inadequate, and all too often, expensive investment
options. Workers should have access to simple investment options,
including low-cost index funds.
- Ensuring workers have access to reliable independent investment advice. Too
often, workers are given self-interested advice from financial advisors
or money managers – advice that may not always lead to the best
retirement investment. All plan participants should have access to
objective advice and investment information to help them better manage
their savings.
- Reducing vesting periods and improve portability of 401(k) accounts. Workers are leaving millions of dollars on the table because of employers’ rules that take away their savings when they change jobs. In many cases workers are required to work at a firm for three years or more before they can fully access their retirement savings. In addition, the GAO says that by automatically rolling over accounts into a new retirement plan when workers leave a job, Americans’ retirement savings would increase by a projected 11 percent on average, with the biggest percentage increases for low-income workers.
The
Committee will continue to look for ways to preserve and strengthen
401(k)s and other retirement plans.
Under Chairman Miller’s leadership, the House Education and Labor Committee held several hearings in 2008 to examine how to strengthen retirement security in the wake of the nation’s financial crisis. The Committee heard from retirement plan experts, retirement plan investment advisors, and retirees who have recently lost considerable portions of their savings in the volatile market.
- At the Committee’s first 2008 hearing, the Congressional Budget Office testified that American workers had lost as much as $2 trillion in retirement savings in the previous fifteen months. More information on the Committee’s first hearing on this topic, held on October 7, 2008 »
- At the follow-up hearing, Chairman George Miller revealed that the U.S. Pension Benefit Guaranty Corporation said it lost at least $5 billion in stock investments during that fiscal year through August 2008, and invested a significant portion of its funds in mortgage-backed securities. More information on the Committee’s second hearing on this topic, held on October 22, 2008 »
On October 10, 2008, Chairman Miller and Rep. Rob Andrews (D-NJ) called on U.S. Treasury Secretary Henry Paulson to suspend the tax penalty for retirees who are forced to make withdrawals but want to have additional time to rebuild their retirement savings. More information on their letter to Paulson »
Earlier in 2008, the Committee passed the 401(k) Fair Disclosure for Retirement Security Act (H.R. 3185) introduced by Chairman Miller to help workers shop around for the best retirement investment options by providing complete information on the fees taken from their retirement accounts.