Rep. Miller Explains How Wall Street Raided 401(k) Plans

Holders of private pensions watched their money go down the toilet while fund managers became flush with cash from hidden fees, says Congressman George Miller.
"There clearly has been a raid on these funds by the people of Wall Street and it has cost the savers -- and the future retirees -- a lot of money that would otherwise be in their accounts, independent of the financial collapse," says the California Democrat in an interview set for 60 Minutes this Sunday, according to a release.
Miller chairs the House Committee on Education and Labor. A subcommittee will hold a hearing on April 22 on legislation to bring transparency to workers' retirement plans, commonly known as 401(k)s.
In 2006 the Government Accountability Office found that info on fees was not easily accessible to plan holders and that plan sponsors were not even required to report some fees. In its report (PDF), the GAO recommended that Congress act to strengthen the Department of Labor's oversight.
Private pensions are the fastest-growing type of workplace retirement plan, with about 50 million workers signed up. Small fees of even a one-percentage-point difference can have a big effect on savings. The GAO illustrated its findings with a hypothetical example:
Assume an employee of 45 years of age with 20 years until retirement changes employers and leaves $20,000 in a 401(k) account until retirement. If the average annual net return is 6.5 percent--a 7 percent investment return minus a 0.5 percent charge for fees--the $20,000 will grow to about $70,500 at retirement. However, if fees are instead 1.5 percent annually, the average net return is reduced to 5.5 percent, and the $20,000 will grow to only about $58,400. The additional 1 percent annual charge for fees would reduce the account balance at retirement by about 17 percent.
Miller's committee passed a similar measure last year. The Fair Disclosure for Retirement Security Act would have required plan administrators to disclose all fees and provide more info on the risks and objectives associated with investment options within a plan, among other things. The bill didn't see a vote on the House floor.
"We tried to just put in some disclosure and transparency in these fees and we felt the full fury of the financial lobby," Miller told 60 Minutes. LinkHere