Republicans proposed comprehensive reforms to improve retirement savings opportunities for workers today, arguing that workers need access to understandable and meaningful information about their 401(k) and other retirement savings vehicles. Congressional Democrats rejected the GOP proposals, instead advancing partisan legislation that Republicans warned could drive up costs for workers while reducing access to individualized investment advice.
“Workers and retirees are struggling in this economic downturn, facing losses in their savings and uncertainty about their future," said Rep. John Kline (R-MN), the committee’s top Republican. “We had an opportunity today to enact bipartisan reforms that would provide quality information to consumers and meaningful relief to employers. Instead, Democrats insisted on pushing through their own plan on a party-line vote, ignoring serious concerns about harmful consequences for workers and retirees."
The legislation considered today is H.R. 2989, the 401(k) Fair Disclosure and Pension Security Act of 2009. It largely mirrors legislation approved by Democrats on the Health, Employment, Labor, and Pensions Subcommittee last week, but includes the addition of partial proposals to provide funding relief to employers offering defined benefit pensions.
Republicans Protect Workers, Provide Needed Relief to Improve Funding Options
Rep. Brett Guthrie (R-KY) and other Republicans negotiated a compromise amendment that provides targeted, temporary relief to make it easier for employers to fully fund their pension obligations in a tumultuous economy. The Guthrie amendment is based on provisions of the Savings Recovery Act, a bill proposed by Republicans earlier this year to help Americans rebuild their nest eggs. Although Democrats rejected a portion of the Guthrie amendment, the proposal nonetheless provides much-needed relief to ease the financial burden on employers while maintaining efforts to fully fund defined benefit retirement plans on behalf of workers and retirees.
Democrats Reject Republican Proposals to Improve Retirement Savings Plans
Republicans offered a number of other amendments during today’s consideration of H.R. 2989, from a comprehensive plan to improve disclosure to targeted improvements to some of the bill’s most controversial components. Each of the Republican amendments was rejected by Democrats on a party-line vote.
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Rep. Kline introduced an amendment to improve 401(k) fee disclosure in a simpler, more effective way. Among other reforms, the Kline amendment would have required service providers to disclose all direct and indirect compensation they would receive in connection with their services, and it would have ensured that participants receive key information on each investment option available to them, including fees, investment objectives, risks, historical returns, and information on any other fees that will be imposed on their account.
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Rep. Howard P. “Buck" McKeon (R-CA) offered an amendment to avoid unnecessary costs and complexity for workers and plan sponsors by eliminating the controversial “unbundling" requirement in the bill. The McKeon amendment would have ensured that valuable information on fees is disclosed to plan sponsors, but would have eliminated the requirement that providers “unbundle" and disclose fees for individual categories that they do not offer - a requirement that Republicans warned would drive up costs without providing a meaningful benefit for workers.
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Rep. Tom Price (R-GA) proposed an amendment to ensure the federal government does not endorse or dictate the particular investment options provided in defined contribution savings plans. Without this amendment, the bill requires that in order to receive liability protections, all plans must include an index fund meeting federally-established parameters - an unprecedented step that Republicans argued would put the federal government in the business of making investment decisions for individual Americans.
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Rep. Kline offered an amendment to assist auto dealers struggling with costly and unexpected pension liabilities because of their closure by the White House Auto Task Force. His amendment would have temporarily suspended withdrawal liability for certain auto dealers whose doors have been closed, calling for the Task Force to report on their analysis of these multi-million dollar liabilities and giving Congress time to review the impact on workers and employers.
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Rep. Kline also proposed an amendment to prevent workers from losing access to 401(k) plans or face paying higher fees because of costly new legal liability. Rep. Kline’s amendment would have made clear that employers exercising due diligence could not be held liable for breaching fiduciary responsibility, and that - consistent with current law - employers can opt for comprehensive services for their plan, and are not required to purchase unbundled services simply to avoid liability.
“Republicans share the goal of improving retirement savings options for workers, and we believe reform is even more urgent today in light of the troubled economy," said Kline. “Although Democrats opted for partisanship over sensible reform today, I remain committed to enacting solutions that will provide real relief while avoiding costs and complexity that workers simply do not need."
