This week’s CBTV show is entitled, “New Federal 401(k) Disclosure Rules Reveal
Internal Fees!”
Despite heavy opposition by
retirement plan providers throughout the U. S., the Department of Labor has no
plans of moving the April 1st compliance deadline for implementing
401(k) fee disclosure rules. However,
plan providers are still waiting for the final rule regarding how they will be
required to disclose their fees to plan participants. The Department of Labor
expects to finalize this provision by the end of this month. These new federal rules will require plan
providers to thoroughly explain how these fees impact 401(k) returns, to both
employers, as well as employees who sign up for these plans.
The Employee Retirement Income
Security Act (ERISA) is a federal law that was enacted in 1974 to protect the
retirement assets of American workers, by implementing rules for qualified
benefit plans. These plans include tax-deferred company sponsored plans, such
as pensions, and now 401(k)s. These rules were set in place by the federal
government to ensure that plan fiduciaries, or those responsible for managing
the assets within a retirement account, did not misuse the assets. It also serves as a “guideline” to how plans
should be administered and address potential irregularities or “red flags” that
could arise in the administration of larger corporate plans. The U.S. Department of Labor’s Employee
Benefits Security Administration (EBSA) is responsible for overseeing the
protection of employee benefit rights.
In 2010, following the recession and a significant decline in 401(k)
account values, EBSA recognized the need to improve transparency of fees and
expenses to workers participating in 401(k)-type retirement plans. New regulations from ERISA were then
published, to help workers become more informed about the management fees being
deducted from their 401(k) account. Now, in the light of increased disclosure,
many employees will learn for the first time just how high some of those fees
have been.
The federal government has tried to
monitor and regulate the management of securities dating back to the
“Securities Act of 1933,” also known as the “Truth in Securities Act.” Before that, it was up to individual states
to regulate securities. It was the stock
market crash of 1929 that prompted action by the federal government, and since
then the government has taken many steps in an attempt to regulate financial
institutions in an effort to protect the investment accounts of all Americans. ERISA was established by the government 41
years later in 1974, to further protect all employee’s pensions, and ensure
they would not lose their retirement income due to mismanagement of funds. Now, this new federal legislation is designed
to protect consumers from losing important retirement savings dollars, due to
extremely high, and often times unnecessary, plan administrative fees. During the most recent recession, many
employees lost a lot of money in their 401(k) plans, when the stock market declined. At the same time many employers cut back
their matching contributions, with some eliminating them altogether. And some employees were even forced to raid
their 401(k) plans in an effort to stay afloat during this tough economic
time.
Again, I’d like to hear from you on
this important topic. What are your thoughts on the new fee disclosure rules?
Do you know what kind of fees you've been paying in the past? Sound off in the
comment section below!
Until next week, Dump Debt, Invest
Wisely, Believe in Yourself and Make it Happen!
