Who Wants More Disclosures?

I received an email from Mike Kruger, Online Outreach Specialist for the House Committee on Education and Labor. The email was in response to my recent blog post regarding the mandatory inclusion of index funds in all 401(k) retirement plans.

Mike wrote: "I know you are aware this markup is coming and I wanted to make sure you had all the information that you and the folks at About.com Guide to Mutual Funds would need. 2 bills regarding 401(k)s and retirement advice will be marked up in our subcommittee. These bills could save individuals tens of thousands (if not more) over their lifetime by increasing transparency and removing conflicted investment advice. Let me know if there is anything else I can do for you."

The subcommittee voted today (you can vote in my poll). The bill now goes to the Education and Labor Committee. The bill is important to investors looking for full disclosure and transparency. It could be a game changer in the 401(k) market (for providers of index funds and for providers of advice).

Specifically, the bill includes (directly from the committee's website):

• Ensure that workers receive basic investment information, including information on risk, return, complete fees, and investment objectives before signing-up for a plan;
• Require that all fees -- in one number -- that are charged against a worker’s account to be included in the account holder’s quarterly statement;
• Require service firms to tell employers the fees workers are charged on all investment options into four categories: administrative fees, investment management fees, transaction fees, and other fees;
• Require 401(k) plans to offer at least one low-cost index fund to plan participants in order to receive protection against liability for participants’ investment losses;
• Require service providers to disclose financial relationships so companies that sponsor 401(k) plans can make sure there are no conflicts of interest; and
• Give the U.S. Department of Labor the authority to enforce new disclosure rules and fine service providers who violate them.

Mutual fund investors should applaud many aspects of the bill. Who doesn't want to know what they are paying for?