"We are disappointed that the Bush administration moved forward to enact a new regulation that will make it harder for workers to receive fair and honest advice when making key financial decisions about their futures.

“With just a few hours to go, the Bush administration is still scrambling to give Wall Street a last-minute payback. Today’s regulation will allow financial services companies to reap windfall profits at the expense of workers and tips the scales towards special interests by opening the door to conflicts of interest among the very consultants purporting to offer unbiased investment advice. At a time when Americans are rightly concerned over their financial future, it’s unfortunate that the Labor Department is using its time to give special interests paybacks rather than working to actually help workers.

“As we transition to a new administration, we will use every tool at our disposal to block implementation of this harmful regulation.”

“Americans have seen trillions of dollars evaporate from their retirement accounts over the last few months as a result of our economic crisis,” said Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee. “Congress worked swiftly, and in a bipartisan way, in order to provide important relief to seniors who may face a steep tax if they do not make a withdrawal from their depleted retirement accounts.”

Miller and Rep. Rob Andrews (D-NJ) called on U.S. Treasury Secretary Henry Paulson in October to suspend a tax penalty for seniors who do not take a minimum withdrawal from their depleted retirement accounts, such as 401(k)s. Last week, the agency declined to act to provide relief for the 2008 tax year. To read the letter to Sec. Paulson, click here.

“Countless jobs and retirement benefits will remain intact thanks to the enactment of the Worker, Retiree, and Employer Recovery Act today,” said Andrews, the chairman of the Health, Employment, Labor and Pensions Subcommittee. “As a longtime proponent of suspending the required minimum distribution for retirees aged 70 ½ and over with 401(k) and other defined contribution accounts and as the author of the transition rule which provides single employers an affordable transition towards fully funding their pension plans, I would like to thank Chairman Miller for his tremendous leadership in enacting HR 7327.”

Current regulations require account holders of 401(k)-type account to withdraw a minimum amount of money every year after they reach 70 ½ years old. If seniors do not take out a minimum amount based on an Internal Revenue Service formula, they are subject to a 50 percent penalty. For instance, if an individual fails to withdraw $4,000, they would be assessed a $2,000 tax the next year.

H.R. 7327 also eases funding requirements for companies and other pension plans forced to make additional contributions as a result of the economic downturn and makes technical corrections to the Pension Protection Act of 2006.

“Americans have seen trillions of dollars evaporate from their retirement accounts over the last few months as a result of our economic crisis,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee. “I’m glad that Congress worked swiftly, and in a bipartisan way, to provide important relief to seniors who may face a steep tax if they do not make a withdrawal from their depleted retirement accounts.”


“This relief will help workers and seniors safeguard their retirement savings during the economic crisis.” said Ways and Means Committee Chairman Charles B. Rangel (D-NY).   “Every segment of our economy is experiencing financial pain and this bipartisan legislation will go a long way to help employers do the right thing for their workers even in these difficult economic times.”


“This year’s economic downturn has seriously impacted the U.S. job market and benefits for workers,” said Rep. Rob Andrews (D-NJ), the chairman of the Health, Employment, Labor and Pensions Subcommittee.  “The House acted responsibly tonight to address this problem by passing the Worker, Retiree, and Employer Recovery Act. The bill will provide financial relief to large and small employers, as well as individuals with 401(k) accounts and alike, who have been adversely affected by this unprecedented market downturn.”


“In the face of daunting economic challenges and an unanticipated strain on our nation’s retirement system, Congress has taken a measured and appropriate step to ease the financial burden on workers, retirees, and employer-sponsored pension plans,” said U.S. Rep. Howard P. “Buck” McKeon (R-CA), the Education and Labor Committee’s senior Republican. “While we remain fully and unequivocally committed to the notion that businesses and unions must fully fund their pension obligations to their workers, the small step we’re taking today will provide much-needed relief to participants, plan sponsors, and beneficiaries in the short term, potentially staving off job cuts, benefit reductions, or financial burdens that would be far more harmful to workers and retirees in the long term.”


“The minimum distribution rules are especially burdensome in the face of sharp financial market declines; suspending these rules for 2009 will provide some much-needed relief to senior citizens, and I hope the Senate is able to act quickly on this measure,” said Rep. Jim McCrery (R-LA), the senior Republican on the Ways and Means Committee.


Current regulations require account holders of 401(k)-type account to withdraw a minimum amount of money every year after they reach 70 ½ years old. If seniors do not take out a minimum amount based on an Internal Revenue Service formula, they are subject to a 50 percent penalty. For instance, if an individual fails to withdraw $4,000, they would be assessed a $2,000 tax the next year.


H.R. 7327 also eases funding requirements for companies and other pension plans forced to make additional contributions as a result of the economic downturn and makes technical corrections to the Pension Protection Act of 2006.

"The Wall Street Journal is needlessly creating fear among Americans rightly worried about their retirement security by misrepresenting my efforts to strengthen workers' retirement savings - attacks that have no basis in fact. I do not support 'abolishing' 401(k)s, moving these plans, or changing their tax status, plain and simple," said Miller. "The truth is that Democrats in Congress are working to preserve and strengthen 401(k)s.

"Last year, our Committee worked with the employer and investment community to pass legislation to increase transparency and protect workers' hard-earned retirement savings from excessive and hidden fees that could cut deeply into their accounts. In addition to providing workers with better information about the fees they're paying, we know other steps must be taken to make sure our retirement system is as strong as it can be for our nation's workers and retirees. These principles will help guide the next Congress as we work to ensure that every American can enjoy a safe and secure retirement."

Recent hearings held by the committee have shown the devastating toll the economic downturn has leveled on Americans? retirement savings, including the loss of over $4 trillion in pension benefits.

To help preserve and strengthen 401(k)-style and other retirement plans, Chairman Miller today released the following principles:

• Expose excess fees that Wall Street middle men take from workers accounts.Currently, millions of Americans are paying excessive 401(k) fees at the hands of Wall Street middle men who refuse to fully disclose and detail extra fees and charges paid by employees. This is wrong, especially in light of the dramatic losses faced by millions of Americans in their 401(k) plans this year. According to the GAO, even a difference of just 1 percentage point in hidden fees can drastically eat into a worker's 401(k) account balance - by as much as 20 percent or more over a career. This 1 percentage point difference could cost a worker with a $20,000 account balance more than $12,000 in reduced savings over this time period.
• Bring young and low-wage workers into the system at a higher rate through automatic enrollment for employers already offering 401(k)s. Unless employers more quickly automatically enroll new workers, nearly 40 percent of workers born in 1990 will have no 401(k)-style savings at all when they retire, according to the GAO. Current law allows employers to automatically enroll their workers in their companies' 401(k)s but employers have been slow to enroll employees. Studies show that automatic enrollment can increase participation by as much as 35 percentage points. And even after 3-4 years, the vast majority of those automatically enrolled, are still participating.
• Ensure that retirement accounts have diversified investment options with low fees.Many 401(k) plans have inadequate, and all too often, expensive investment options. Workers should have access to simple investment options, including low-cost index funds.
• Ensure workers have access to reliable independent investment advice. Too often, workers are given self-interested advice from financial advisors or money managers - advice that may not always lead to the best retirement investment. All plan participants should have access to objective advice and investment information to help them better manage their savings.
• Reduce vesting periods and improve portability of 401(k) accounts. Workers are leaving millions of dollars on the table because of employers' rules that take away their savings whey they change jobs. In many cases workers are required to work at a firm for 3 years or more before they can fully access their retirement savings. In addition, the GAO says that by automatically rolling over accounts into a new retirement plan when workers leave a job, Americans' retirement savings would increase by a projected 11 percent on average, with the biggest percentage increases for low-income workers.

In April, the committee passed the 401(k) Fair Disclosure for Retirement Security Act (H.R. 3185), which would help workers shop around for the best retirement investment options by providing complete information on how much in fees is taken from their retirement accounts. The legislation was supported by the AFL-CIO, the AARP, the American Society of Pension Professionals and Actuaries, the Council of Independent 401(k) Recordkeepers, and the Pension Rights Center. For more information, click here.