Steve Kroft's story about retirement insecurity, especially among those 55-65 years old, ran on 60 Minutes last night. Mr. Kroft highlighted some of the concerns about 401(k)s as the primary source of retirement income. In doing so he interviewed Chairman Miller about the hidden fees in many 401(k) programs.
"There clearly has been a raid on these funds by the people of Wall Street. And it's cost the savers and the future retirees a lot of money that would otherwise be in their account, independent of the financial collapse," Rep. George Miller [D-CA] said.Watch the entire 14-minute segment below:
Congressman Miller is chairman of the House Committee on Education and Labor, and a staunch critic of the 401(k) industry, especially its practice of deducting more than a dozen undisclosed fees from its clients' 401(k) accounts.
"Now you got a bunch of economic wizards jumping in and taking money out of your retirement plan, and they don't wanna tell you how much, you can't decipher it in simple English, and they're not interested in disclosing it, or having any transparency about it," Miller told Kroft.
"And most of the people that look at their 401(k)s have no idea that these fees are being taken out?" Kroft asked.
"No. Where would you find it? Where would you find these fees in this prospectus? You can look on any page you want, and when you're all done reading it, and you will find some of the fees and the commissions here, but you won't find them all, and I'll bet you won't find half of 'em," Miller said.
There are legal fees, trustee fees, transactional fees, stewardship fees, bookkeeping fees, finder's fees. The list goes on and on.
Miller's committee has heard testimony that they can eat up half the income in some 401(k) plans over a 30-year span. But he has not been able to stop it.
"We tried to just put in some disclosure and transparency in these fees. And we felt the full fury of that financial lobby," he said.
David Wray, a lobbyist for the 401(k) industry, says he favors disclosing the fees, but his partners in the financial industry don't.
Asked if he thinks most people know these fees exist, Wray said, "I think they know that there are fees. They don't know exactly how large they are."
"Why do you think the financial services industry is opposed to fee transparency?" Kroft asked.
"I don't know that they're opposed to it. I think the issue is that…," Wray replied.
"You don't think they're opposed to it?" Kroft asked. "You're a lobbyist in Washington, right? You know they're opposed to it. …George Miller hasn't been able to get a bill to the floor."
"I think they want to keep the systems as simple and not make changes. They like the way things are. And whenever you push people out of their comfort zones, you know, it's an issue," Wray replied.
"I mean, they're comfortable with the situation because they're making a ton of money or they have made a ton of money," Kroft said.
"Well, and their systems are set up in certain ways. You know, this is gonna be a big change," Wray replied.
"There clearly has been a raid on these funds by the people of Wall Street. And it's cost the savers and the future retirees a lot of money"
That's called the stock market. Sometimes the market goes up, and sometimes it goes down. When it goes down, the market value declines, and vice versa. That’s not anything new. And by the way, congressman, I think you should understand something. When you do a negative hit piece on 401k plans, keep in mind that some misguided people end up taking full withdrawals and exchange out of their more aggressive funds. (worst thing they can do by the way) And that also causes NAV’s to drop, which means you're actually now contributing to these individual's account’s dropping in value.
Any fees taken out of an account are viewable in the participant’s transaction history. My first four years in the retirement industry was in customer service and the only fees I remember were recordkeeping fees (Around $6/quarter) usually covered by the plan, and loan maintenance fees and we always received calls from participants on them because they definitely are on the statements and in their transaction history. If you’d like, I’ll educate you.
SJ,
Please note the entire quote, "There clearly has been a raid on these funds by the people of Wall Street. And it's cost the savers and the future retirees a lot of money that would otherwise be in their account, independent of the financial collapse,"
Chairman Miller is aware that the stock market goes up and down. He is more concerned with hidden fees that sap the strength of accounts. As Mr. Kroft reported, "There are legal fees, trustee fees, transactional fees, stewardship fees, bookkeeping fees, finder's fees. The list goes on and on." In fact, just a 1-percentage-point in excessive fees can reduce a worker’s 401(k) account balance by as much as 20 percent or more over a career.