On Wednesday, June 24, 2009, the House Education and Labor Committee approved H.R. 2989, the 401(k) Fair Disclosure and Pension Security Act of 2009
by a vote of 29 to 17.
The bill is a combination of H.R. 1984, Chairman Miller’s previous plan-fee bill, and H.R. 1988, Rep. Andrews’ investment advice bill, along with the addition of a new provision providing defined benefit relief for single-employer plans.
The legislation would make several changes to the current investment landscape, including:
1. Impose new disclosure requirements on 401(k) service providers;
2. Require service providers to disclose all fees assessed to a participant’s account, broken down by categories;
3. Require plan administrators to offer one low-index fund in order to receive protection against liability for participants’ investment losses;
4. Ensure disclosure of a service provider's financial relationships;
5. Prohibit “self-interested investment advisers” from providing advice to employer-sponsored retirement account participants;
6. Require annual reporting of investment advice arrangements to the U.S. Department of Labor;
7. Provide a safe harbor for an employer that “acts in the interest of the plan participant” when providing investment advice; and
8. Promote financial literacy through an education campaign.
Although a variety of amendments were proposed, only one passed the committee. That amendment, which was offered by Rep. Guthrie (R-KY), will allow single-employer plans to contribute only the interest on their 2008 asset losses over the next two years, then amortize the year’s actual asset losses over the subsequent seven-year period.
Continued dialog on the issue of defined benefit plan relief is still expected, as Chairman Miller stated that there is a placeholder in his bill for further relief.
Due to the bill’s fiscal implications, it is unclear if the House Ways and Means Committee will need to review the legislation before it goes to the House floor for a vote.
In response to the Committee’s approval of H.R. 2989 on Wednesday, SHRM joined with a variety of other groups to oppose some provisions of the bill, specifically relating to investment advice. You can access this letter HERE.