By Susan J. White and Jonah Mainzer, Susan J. White and Associates, Inc.
Washington is locked in another showdown between the Democratic Congress and Republican Administration. Funding for the federal government has not run out only because Congress has passed a series of Continuing Resolutions to fund all departments and activities. In addition the continuing fight over the State Children's Health Insurance Program (SCHIP)-a bi-partisan agreement that had been hammered out by Congress over many months- has paralyzed many other bills and many other issues and priorities remain unresolved and will likely remain unresolved until January. It is likely that a large omnibus package will be required to pass all the remaining appropriations bills for fiscal year 2008 to keep the government open.
2008 will also be a relatively short year legislatively with the looming presidential elections. Not only are a record number of sitting members running, but for the first time in recent history there is no sitting president or vice president running growing the primary field as well. The upcoming elections will also slow down legislation action, as leaders will look to protect vulnerable members from having to vote on any controversial legislation and open them up to any further attacks by challengers.
NAGDCA Testifies Before House Committee on Ways and Means
NAGDCA President Mindy Harris was called to testify before the House Committee on Ways and Means in an October 30 hearing titled "On the Appropriateness of Retirement Plan Fees." Harris talked about the recent NAGDCA survey on fees, telling the Committee, according to NAGDCA's survey, that state and local government plan sponsors are very aware of fees and disclosure of fees is a regular and ongoing practice in the vast majority of public plans.
Harris also testified regarding the "prudent man" standard under which the fiduciary must act. In the NAGDCA survey over 2/3 of total respondents rated their administrative fees as reasonable and over ¾ of respondents rated the investment fees as reasonable.
In addition to NAGDCA, there were thirteen other witnesses from both public and private sector. The first panel of witnesses was from the federal government and they testified to what the government is planning regarding rule making and guidance. The final two panels had witnesses that represented public plans, private plans as well as individual companies retirement plans. These witnesses all testified to the appropriateness and disclosure of fees that the plans charged.
All three panels featured a question and answer session with the members of the Committee. Due to pending votes and the fact that Ms. Harris was on the final panel only two members remained to ask questions follow-up questions. Representative Sam Johnson (R-TX) asked Harris if NAGDCA thought that state and local plans needed to be governed by ERISA or some other federal oversight function? Ms. Harris answered that there is no need for additional oversight as the plans are public and have their own fiduciary oversight. As a result all fee and disclosure matters are open and available. Representative Richard Neal (D-MA) asked if NAGDCA thought that increased federal requirements regarding disclosure of fees would help state and local plans cut down on the need to use consultants? Ms. Harris answered that smaller plans may always have to rely on outside consultants due to the lack of internal resources. However, increased disclosure, if it is reasonable, could help in some cases.
Senate Special Committee on Aging Hearing
On October 24 the Senate Special Committee on Aging held a hearing titled "Hidden 401(k) Fees: How Disclosure Can Increase Retirement Security." Chairman Herb Kohl (D-WI) stated at this hearing that according to a recent AARP study less than 20% of plan participants even know they are paying fees. In addition 2/3 of people with retirement plans only have 401(k) plans. The Chairman also noted that he, along with Senator Tom Harkin, (D-IA) was introducing a bill that would require full disclosure and they were hopeful that as a result there would be more competition and lower fees.
Senator Gordon Smith (R-OR) mentioned that with 401(k) plans the responsibility lies with the individual more than with the plans' sponsors. This may be one of the reasons that the nationwide savings rate last year was -1%. Senator Smith discussed his pending legislation to allow additional automatic enrollment provisions for plans that are not covered by the automatic enrollment provisions in the Pension Protection Act of 2006. The legislation would also allow long-term part-time employees to enroll in the plans.
All of the witnesses emphasized that the key is to make the disclosure clear, comprehensive, and at the same time make it readable. Many indicated concerns that providers may only want to fulfill the legal requirement to disclose "drowning" individuals in paper; in hopes that much will remain unread and, therefore "hidden".
National Save For Retirement Week
National Save for Retirement was celebrated during the week of October 21-27 with events nationwide. Senators Smith and Conrad (D-ND) cosponsored the Senate Resolution and Representatives Allyson Schwartz (D-PA) and Sam Johnson (R-TX) cosponsored the companion resolution in the House. The week before Save For Retirement Week, Representative Johnson gave a speech on the House floor as a way of introduction and encouraged people to save more for retirement.
Various state and local governments not only held events to encourage retirement savings but they also passed resolutions and proclamations similar to the ones passed by the federal government for there own jurisdictions.
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