Is 401(k) reform on the horizon?

He's not the most familiar face in Congress, but he may be instrumental in determining if you'll be able to live out your dream retirement.

Rep. George Miller, a California Democrat and chairman of the House Education and Labor Committee wants to reform 401(k) plans. His efforts have taken on increased urgency as many investors have taken hits of 20% to 30% on their 401(k) account balances over the last year.

A key concern is that 401(k) providers do not clearly spell out the fees they charged to manage the investments and administer the accounts. The lack of clear disclosure makes it difficult for your employer to comparison shop to offer you the best plan. It also makes it more difficult for you to chose among the various mutual funds offered in your plan. Without this knowledge, you may be paying too much, costing yourself thousands of dollars.

For the second year in a row, Rep. Miller is trying to get legislation through Congress to force 401(k) providers to reveal their fees in plain English. To further cut costs, the bill also would require plan providers to offer at least one low-cost index fund. Finally, his proposal would give the Department of Labor power to enforce the fee disclosure and fine providers who violate the law.

In a recent interview with The Associated Press, Miller explains his view on fee disclosure and the prospects of getting legislation passed this year.

Q: Why do we need congressional action on 401(k) fees?

A: I don't think we have enough transparency on what the actual fees are that are being charged against individual 401(k) accounts whether they're trading fees, investment fees, advisory fees or stewardship fees. All of these things add up.

What we do know is that they do add up and they can have a substantial impact on the amount of savings that people have for their retirement over their 20- to 30-year working career.

We had witnesses testify at hearings, including Jack Bogle, the founder of Vanguard. He said these fees could eat up 75% of what you would otherwise have in your retirement savings (over a lifetime of investing). There's a churning of these accounts and the internal trading fees can just mount and mount.

Q: What have you learned about the fees from your committee hearings?

A: If you look at the system, basically what you have is working families making the conscious decision every month to try to save some money for retirement. Then along comes people managing those funds for them and they start dipping into those funds for fees that are really not in the best interest of those savers. So, you have elite financial managers getting rich off the back of middle class working people. The last thing they really want is transparency.

Q: Why did the bill fail last year?

A:We passed it out of committee, took it to the floor and it was pretty clear not much was going to happen in the Senate. It was also pretty clear that if we passed it, George Bush would never sign it. So, there wasn't a lot of point in it. But, we also were trying to give visibility to the issue.

Obviously, now there's been substantial conversation across the financial community about the need for the bill or opposition to the bill. But the visibility on this question of fees has risen substantially because of the legislation and we think if are successful in getting this through Congress that this administration would certainly give consideration to signing it.

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