Tuesday, June 16, 2009
New Legislation for 401(k) Fee Disclosure
I sat “news flash” with tongue firmly in cheek. According to the AmericanShareholders.org website,
“House Ways and Means Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass., has introduced legislation that would require greater disclosure of fees in 401(k) and other employer-sponsored retirement accounts by companies and plan administrators, coupled with tax penalties for failure to comply…Failure to provide such notices would result in a tax of $100 per day, capped at the lesser of $500,000 or 10 percent of a plan’s assets.”
There is an old story about General MacArthur, who was camped beside a large river and needed to get his troops across. He called in his engineer and asked how long it would take to put up a bridge. “Three days” was the reply. “Good, then have your draftsman draw up plans immediately”
Three days later, MacArthur called back his engineer to see how it was progressing.
“Sir, the bridge is finished, and you can take your troops across now provided you don’t have to wait for the plans. They’re not done yet”
The point is, that full fee disclosure is available now if you know where to look. A competent advisor can provide a transparent program, much like the old “visible engine” toys that were around when I was a kid. Yes, it costs money to run a 401(k) plan, but there’s no reason you shouldn’t know what money you are spending and where it goes to.
So…why wait for legislation and the Government to try shining a bright light on the vendors?