The committee obtained a draft PBGC Inspector General report that alleges Millard may have had knowingly inappropriate contacts with Wall Street firms, some of which were awarded contracts to advise PBGC as it reallocated a portion of PBGC’s then $48.4 billion investment portfolio. PBGC solicited bids for these contracts to implement the new investment policy the former PBGC board approved in February 2008. The policy would, among other things, dramatically increase PBGC’s exposure to the stock market. The Inspector General’s report also raises serious questions about whether Millard had contacts with firms where he may have been seeking employment.

To read the draft PBGC Inspector General report, click here.

Last year, the committee investigated an outside consultant’s report – commissioned by PBGC – that raised series questions about the agency’s management and governance practices.

For more information on the committee’s work, click here.

The 401(k) Fair Disclosure for Retirement Security Act of 2009 (H.R. 1984) will help workers shop around for the best retirement options by requiring simple fee disclosure on the investment options contained in their employer’s 401(k) plan. Current law does not require all fees workers pay to be disclosed; and even for information that is available, it can be difficult for workers to find and evaluate.

“Especially during these troubling economic times, workers need to be able to account for every penny taken from their hard-earned savings,” said U.S. Rep. George Miller (D-CA), chairman of the House Education and Labor Committee. “Workers should be entitled to clear and complete information about their retirement security.”

According to recent data, more than two-thirds of workers with retirement plans rely solely on 401(k) type plans as their primary retirement vehicle. Where investment decisions were once made by professionals managing a traditional pension portfolio on behalf of workers, the responsibility of picking the right investments and implementing retirement savings strategies are left up to an individual account holder.

“During a time where American workers have already lost $2 trillion in assets due to last year's market downturn, it is vital that employees have full access to clear information regarding their hard-earned retirement savings and financial security,” said Rep. Rob Andrews (D-NJ), chairman of the Health, Employment, Labor, and Pensions Subcommittee.

According to the Government Accountability Office, even a seemingly small difference in the fees that workers pay can make an enormous difference in the overall size of their 401(k) account balance. A 1 percentage point difference in fees can reduce retirement benefits by nearly 20 percent. A 2007 survey by the AARP found that roughly 80 percent of plan participants were not aware how much in fees were taken out of their 401(k)s.

Specifically, the 401(k) Fair Disclosure for Retirement Security Act of 2009 would:

• Ensure that workers receive basic investment information, including information on risk, return, complete fees, and investment objectives before signing-up for a plan;
• Require that all fees – in one number – that are charged against a workers account to be included in the account holder’s quarterly statement;
• Require service firms to tell employers the fees workers’ are charged on all investment options into four categories: administrative fees, investment management fees, transaction fees, and other fees;
• Require plan administrators to offer at least one low-cost index fund to plan participants in order to receive protection against liability for participants’ investment losses;
• Require service providers to disclose financial relationships so companies that sponsor 401(k) plans can make sure there are no conflicts of interest; and
• Give the U.S. Department of Labor the authority to enforce new disclosure rules and fine service providers who violate them.

 A similar bill (H.R. 3185) was approved by the committee in April 2008.

For more information on the 401(k) Fair Disclosure for Retirement Security Act of 2009, click here.

According to a survey released late last year by the AARP, a growing number of baby boomers have stopped contributing to their retirement plans just to make ends meet as a result of the financial and housing crises. Many companies have also recently announced that they are suspending matching contributions to their workers’ 401(k)s.

“Our nation’s system of retirement security is imperiled, headed for a serious train wreck,” said John C. Bogle, founder and former chief executive of the Vanguard Group. “That wreck is not merely waiting to happen; we are running on a dangerous track that is leading directly to a serious crash that will disable major parts of our retirement system.”

The economic downturn has drained trillions of dollars from Americans’ 401(k) accounts and hit other forms of retirement assets, including home values. In fact, median household net worth for those near retirement fell by more than 45 percent between 2004 and 2009, according to an analysis by the Center for Economic and Policy Research.

“The events of the last two years shown how exposed workers’ retirement income is to market risk,” said Dean Baker, co-director of the Center for Economic and Policy Research. “The collapse of the housing bubble has called attention to the fact that the value of not only their pensions, but also their homes, fluctuate with the market, while their homes are an even more important asset for most workers.”

According to recent data, more than two-thirds of workers with retirement plans rely solely on 401(k) type plans as their primary retirement vehicle. Where investment decisions were once made by professionals managing a traditional pension portfolio on behalf of workers, the responsibility of picking the right investments and implementing retirement savings strategies are left up to an individual account holder.

“Today most workers with pension coverage have a 401(k) as their primary or only plan. They were not designed for that role,” said Alicia Munnell, director of the Center for Retirement Research at Boston University. “Evidence indicates that people make mistakes at every step along the way. They don’t join the plan; they don’t contribute enough; they don’t diversify their holdings; they over invest in company stock; they take out money when they switch jobs; and they don’t annuitize at retirement.”

As a result, witnesses urged Congress to work on solutions that would strengthen 401(k) plans and consider additional strategies to ensure that all Americans have the ability to save for retirement, regardless if their employer offers a plan at work.

“As we work to preserve and strengthen 401(k)s and the other legs of the retirement savings stool, we must also tackle these difficult questions about the state of our nation’s retirement system as a whole and look to see whether we need to create a retirement system that works for all Americans, not just the fortunate few,” said Miller.

Photos from the hearing:


Created with flickrSLiDR.

"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.