Republicans believe today’s workers should have access to clear and useful information about their retirement accounts to help them build a more secure financial future – especially in this troubled economy.
Instead of embracing the commonsense reforms proposed by Republicans, Democrats are advancinga bill that could actually drive up 401(k) costswhile limiting workers’ access to individualized investment advice.
This action affects millions of Americans, as 401(k) plans are now the primary retirement savings vehicle used by American workers. In 2008, there were more than 700,000 401(k) plans covering more than 50 million active employees. Even after the financial meltdown last fall, total 401(k) assets exceeded $2.5 trillion.
Specifically, H.R. 2989:
- Drives up retirement plan costs. H.R. 2989 requires that retirement plan providers “unbundle” and disclose fees for individual categories of service, even for servicesthat they do not sell on an individual basis. This pointless exercise will drive up costs for workers without providingany meaningful benefit.
- Increases costs through frivolous lawsuits. Despite mandating voluminous new “disclosure” requirements, the bill does nothing to shield plan sponsors who follow these new rules from “gotcha” lawsuits. Instead, the bill invites frivolous litigation that will drive up costs and drive employers away from providing 401(k) plans to their employees.
- Puts Washington in charge of retirement options. The bill requires that in order to receive liability protections, all plans must include a federally approved index fund. This would put government in the business of making investment decisions for individual Americans – an unprecedented step.
- Limits workers’ access to individualized investment advice. H.R. 2989 makes it virtually impossible for employers to offer the benefit of individualized investment advice to their workers by repealing bipartisan reforms enacted in 2006 to make investment advice more widely available and blocking many industry experts from offering this service.
- Overwhelms the system with vast new reporting requirements. The bill mandates voluminous new reporting and disclosure to workers and plan sponsors, but provides no guarantee that the information will be understandable or useful. This has the potential to overwhelm and confuse workers or force employers to stop offering this benefit because of higher costs and complexity.
Despite its title, H.R. 2989 provides neither fair disclosure nor security for workers. Instead, it burdens them with complex information,higher costs, and less access to financial advice that can help them cope with the troubled economy.
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