Q: Besides the change in political environment, what feedback have you received about the bill?
A:Clearly, with the financial scandals, and the financial collapse and what happened to people's 401(k)s over the last year, people are focused on their 401(k) and they're aware of how much they need those retirement savings. So there's even a renewed interest there — what's the real cost to them of how their 401(k) is managed? If 401(k)s remain as part of our retirement system — which they've become almost by accident — we've got to make sure that there's transparency and they're safe and secure. There's enough volatility in the market to scare people, but they should not be losing their savings by fees that cannot be justified and are excessive.
Q: Does the bill regulate fees by placing limits on how much can be charged?
A:No. We just address disclosure at this point.
Q: Disclosure may give people information to make choices, but isn't there a need to regulate fee amounts?
A:I don't know the answer to that question yet.
Q: Do you have a sense for whether the 401(k) is the best retirement savings vehicle for workers?
A:I think it needs to be strengthened. I think it needs to be secure. It needs to provide safer options for individuals. It needs to certainly be safer for people who aren't actively engaged in the management of their funds. People who do manage these have to have a very strong fiduciary relationship to the people whose money they're managing.
Q: The bill includes a few other requirements, including mandating an index fund option. Why is that?
A:We think there also should be a low cost option available to people especially if we're going to have people automatically enrolled. Then their money ought to be in a very low-cost option. And if they decide they want to do something different with their money, then they should be able to do that. I think it's pretty clear that an index fund would be a vehicle to start people out. Then, they can decide.
There have been other alternatives proposed. But when you look at life-cycle funds, for instance, again if you don't have the transparency and disclosure, it's not quite clear what that life cycle fund represents to most people. It may be high risk. We have value funds, they're advertised as stable value funds and they're neither stable or have value in them.
An index fund, if you buy an S&P 500 index or some other index you kind of know the totality of the market that your buying and that's fine. That's a holding pattern and if people want to engage in additional information they can make other decisions. I believe those kinds of changes are necessary.
Q: Where is the bill now in the process?
A:We've had hearings and we hope to schedule a markup on the bill in the near future. As far as when it might come to the House floor, we'll have to discuss that with the leadership.