The 401(k) pension plan industry in the US is heading for a probe into its fee structures and practices of the kind New York attorney general Eliot Spitzer inflicted on the American mutual fund and insurance industries.
Influential voices in the new Democrat-controlled legislature, encouraged by several class action law suits and a finding by the Government Accountability Office that some 401(k) practices “may not be in the best interest” of investors, are calling for public hearings.
401[k] fees, including commissions and administrative expenses, are paid by account holders, many of which are only dimly aware of the sizeable impact they can have on performance and growth.
A flurry of class action lawsuits filed by 401[k] account-holders against pension plan sponsors for breach of their fiduciary obligations under the Employee Retirement Income Security Act [ERISA], in failing to curb fees and expenses, first brought the issue to public attention.
Then, earlier this month, a report by the General Accounting Office concluded that US Federal law does not require 401[k] plans to provide enough information on fees to enable investors to make sensible choices. It is on the basis of this report that Democratic Representative George Miller, chairman of the House Education & Workforce Committee, has said he wants his committee to hold hearings on the issue.