myself this time necessary for an opening statement today this committee will consider important legislation to help americans better save for their retirement over the last three decades the number of americans with four hundred one k style retirement savings plans is skyrocketing with a number of americans the traditional pension plans has plummeted fifty million workers have four hundred one k style plans nearly two thirds of the private sector workers who have pension plans have a four hundred one k plan and only a four hundred one k plan given the increasingly prominent role of four hundred one k plans is critical that the plans provide the best possible deals for their participants yet the median four hundred one k account balance today is only about twenty three thousand dollars for many retirees it's not enough to finance a single year every time it is no surprise that many americans worry about how they will every save enough to last them through retirement part of the problem is that far too many four hundred one k plan participants are not getting the best deals for their plans many four hundred one k stout plans charge hidden fees that can cut deeply into workers retirement savings and many plan participants do not have access to low cost investment options index funds that can help them boost their retirement savings now more than ever it is critical that we address both of these issues of the housing bubble has already diminished one of the key sources of wealth for millions of american families but with workers that have a four hundred one k plan is a double whammy as the market downturn has battered their retirement savings we cannot allow unjustified fees to compound this loss even further for people who have worked long and hard to build up the savings for too long companies in the financial service industries that maintain a stranglehold on retirement savings that that they didn't earn and don't belong to them the purpose of this legislation is to take these hard earned savings away from the special interest in return them to their rightful place the retirement accounts of american workers as a at the committee hearings last year the government accounting office testified about the problems posed by hidden four hundred one k fees under the current law but weak disclosure requirements mean that workers lack critical information about the fees the pain you can see from this chart that according to the g a o testimony because of weak disclosure requirements some eighty percent of workers did not know the fees were being taken out of their accounts some of these fees may be reasonable and necessary but the four  plan participants the customers should be able to make the judgments for themselves the negative consequence of these hidden fees can be significant again the g a o said that a one percent increase in fees would cut retirement income by almost twenty percent o ver over the twenty years and thirty percent over thirty years a significant amount of money of people who are struggling every week to put away a small amount in that plan the h r h r thirty one eighty five is a modest proposal  address the issue of these fees the legislation does not mandate that the the fees that for a one service providers may or may not charge it simply requires providers to disclose a clear and simple terms all the fees that they are charging to plan participants the fees would have to be broken down into four categories fees for the administrate of expenses fees for investment management fees for transaction costs and all of the fees to help workers better understand their investment options that the bill would require for a one k plan to provide workers key information there are options such as the historical risk return and fees the legislation would also require employers to offer at least one low cost index fund as an investment option for employees participating in four hundred one k plans studies have shown that index funds outperform an overwhelming majority of actively managed and often higher cost funds the bill would not require employees to invest in the index funds it was simply ensure that such funds are available to workers if they choose to invest in them in fact seventy two percent of four hundred one k plans already offer equity index funds according to a two thousand and six study clearly there's there's no reason why we cannot make index funds available to all workers who should be able to choose for themselves whether or not to invest in them the legislation will provide information and fees not just to workers but also to their employers companies sponsor plans and offer and offer them as an employee benefit service providers would also have to disclose to employers any potential conflicts of interest that they may have lastly the legislation puts teeth into these new requirements by requiring that the department of labor assess compliance with them and issue citations for violation for most of this decade american workers have not reaped their fair share of the economic benefits of their hard work faced with stagnant incomes and rising prices for basic goods and services american families have had to struggle more than ever to put away some savings workers earn those savings and the statements belong to them workers are the ones who will depend on those savings for a secure retirement they're entitled to a clear and complete information about their own savings after a lifetime of hard work retirees ought to have the financial security that allows them to focus on family and friends without sacrificing their standard of living helping american workers to make better informed decisions about their retirement options is critical step toward increasing retirement security and increasing worker participation in those options that are available to them with that i would like now to recognize congressman akin the senior republican of the committee thank you chairman miller and good afternoon we're here today to consider a bill with the stated goal of ensuring a more secure retirement for the nation's workers it's a bipartisan goal and one that we have worked tirelessly in this committee to promote more specifically the bill before us is an attempt to increase disclosure requirements for divine defined contribution plans like four a one ks i  should begin by noting that i'm a strong supporter of meaningful disclosure disclosure can be a powerful tool when properly utilized it can empower consumers and foster competition in the marketplace but disclosure for its own sake absent meaningful consumer benefits can also be nothing more than another washington mandate that hamstrings our economic engine when chairman miller introduced this legislation i was hopeful that we would be able to work together to fashion a compromise to strengthen the quality of information available to plan sponsors and participants without inadvertently forcing employers out of the voluntary retirement benefits system because of unworkable new mandates chairman miller has taken steps to respond to some of the criticisms and concerns that have surrounded this proposal ultimately however the bill that we will take up today continues to raise serious concern this bill proposes increased disclosure on two levels it increases the information given by service providers to plan sponsors and by plan sponsors to participants at the end consumer level the bill continues the  increase the amount of information given to employees by their employer the plan sponsor this is a lot of the goal i think it's interesting the chart that was up there that showed seventeen percent of people  were asked new what their expenses were they were paying out of there for a one k and be interesting to know how many of us here on the committee know what these we're paying for our four hundred one k our savings plan i doubt that we'd be up to seventeen percent we know that by educating consumers we can increase participation and encourage wise retirement planning decisions i continue to have concerns however that this bill may inadvertently  focus more on information quantity than quality if that is the case we may do more harm than good by overwhelming workers with cumbersome or in comprehensible information worse still the cost of producing these layers of additional disclosure will undoubtedly be passed along to consumers achieving the exact opposite effect than is intended i still say when when when all the smoke clears th cost reduction act that we passed for higher education last year is going to result in a higher cost of education for young people i'm still more troubled however by what this bill does with respect to the information mandated from service providers to plan sponsors major services offered by service providers generally include recordkeeping compliance and investment management often employers will purchase bundled services in which they receive a comprehensive plan services under a single contract while some plan sponsors prefer to negotiate their plan services on a bundle basis others have found bundled services to be the most economical and practical solution the result of this bundling practice is that some service providers simply do not offer all services on a cart basis yet this bill requires pricing to be broken out on an individual service basis even when those services are not offered as such providers are in essence being asked to fabricate information for the sake of disclosure even when that disclosure has no meaningful purpose i have several other concerns with the underlying bill some of which we will address through mammoth others of which i expect chairman miller will address in his substitute but there is one additional issue that bears mentioning before we move forward whether we agree or not on precisely how to achieve meaningful disclosure in these types of retirement plans we are all here acting in good faith in an effort to address the broader issue of disclosure i welcome that debate but i believe we would do a great disservice to the cause of meaningful disclosure if we stray too far from that goal for that reason i question very seriously the inclusion in this bill of a mandatory index fund for all participants directed plans it is incredibly dangerous for the federal government to put its seal of approval on one particular investment choice whether or not that is the intent it would be foolish to deny the fact that if the federal government mandates a particular option workers will view that option has as having been endors encouraged by policy makers this new mandate offers nothing in the name of disclosure and sets us on a slippery slope in which the federal government will dictate individual's investments this is not a path we should be taking chairman i recognize the work that has been put forth to develop this bill and i share your commitment to ensuring retirement security in a changing economy i'm open to exploring a legislative solution should have become clear that one is necessary and i look forward to working with you in that regard but i cannot help but feel that we are acting prematurely today the u s department of labor has already undertaken at least three separate regulatory initiatives relating to pension fee disclosure these have been under consideration as far back as two thousand and six and the first of these rules has already been issued in final form this committee tends to want to put the cart before the horse when it comes to rule making but in this case i think it's clear that steps are being taken at the regulatory level and we need to take those into account mr chairman once again i want to applaud you for your work on this bill i'm disappointed that we've not been able to reach agreement but i hope today that we can find common ground and begin to resolve some of these concerns yield back i thank you gentlemen for his remarks and i appreciate the cooperation that he's offered to date and we obviously will continue to work together on that the clerk will designate the  three one eight hundred one k fair disclosure for retirement security act of two thousand and seven as you know sent to dispense with the with the reading of the bill here no objection so ordered i now call upon them in the nature to substitute that which is at the desk has been distributed to the members in each of your your folders and the clerk will designate the name in the nature of a substitute and the men and nature of a substitute to h r three one eight five offered by chairman miller of california based and for any other fees not included in those in those categories the original bill which had much more extensive bundling requirements after discussions with employers and others they felt that this was the the most relevant of the of the targeted fees the amendment gives service providers flexibility to provide estimates based upon the previous years experience in the meme it permits service providers who contract with an affiliated parties to rely on that information that they receive provided they have no reason to question the information provided to him it also requires that workers be clearly told which charges are being paid by their work and which charges are being paid by the employer and they move it all to the to the original tax also permits employers to provide workers have no non non burdensome way to request a paper disclosure and with that i recognize this mccain if he has any comments on the on the subject i think the gentleman for yielding looking at this amendment and hearing your description this would appear to be in error wholesale rewrite of the introduce bill and some ways this is a positive sign the bill as originally introduced was prodded with problems and this amendment appears to have been developed in direct response to many of the concerns that i and many others have raised but while i appreciate the steps that have been taken to improve the bill i must register my objections to the way in which it is being brought up the original bill was introduced nearly nine months ago we held preliminary hearings before the bill was even introduced to explore areas he issues and we convened a legislative hearing last fall that looked at the specific proposals included in the bill while i did not support the contents of the original bill i did appreciate the effort that was made to ensure its careful consideration and contrast this substitute which is virtually a new bill was not made public until yesterday just a day before markup again while i appreciate the steps that have been taken to improve the bill i believe that on an issue of this complexity a more deliberative process is warranted setting process aside i continue to have concerns with the substance of the amendment for instance while the number of categories has been narrowed this proposal continues to require the unbundling of services for the purpose of disclosing these reporting for pieces of artificial and meaningless information is perhaps better than reporting thirteen but it doesn't change the fact that we're demanding information that in some cases simply does not exist the substitute also retains the requirement the plans include an index fund that is quote likely to meet retirement income needs putting the federal rubber stamp on a particular investment choice is not only an inappropriate departure from the long standing framework of a risk but a dangerous overreach that could encourage workers to select an investment strategy that may not best fit their needs whether this is a direct mandate or an indirect mandate as a condition of liability protection as i expect will be proposed this is an equally dangerous proposition for these and other reasons i will not be able to support this substitute however we have prepared a number of amendments that i believe will significantly improve the underlying bill i look forward to a constructive debate debate that will build on this committee's history of thoughtful well reasoned reforms to promote a more secure retirement for american workers  willing to listen all sides of the manager's amendment from individuals employers members of the committee and industry and i will support it however i also want to acknowledge that many plan administrators still reporting conditions and i look forward to continued discussions with the chairman and other members of this committee as the build through the legislative process to ensure we can balance the best interest of the employee while not over burdening and providing an important service i believe we all share a common goal employers must have the information they need to evaluate plans and provide the best options to plan participants so they can successfully manage their retirement savings every hardworking man and woman on those country deserves a fair and honest process and a comfortable now to retire i look forward to making that more easily achievable while also helping to improve our nation around about answer your question this bill is exclusively within our jurisdiction there has been discussions on ways and means of whether they would not move a bill i don't know that any decisions been made i haven't been informed of that but they have had some discussions on on this on this matter because it seems to me that they would have to move companion legislation some point to that we could actually put this into law or make it make make it or meet all the requirements requirements and without having been said i would just question why are we moving so quickly with this we just got the draft of the amendment now and it would help if we had more time to review this waiting for ways and means could be a long lifetime career but this legislation is self contained we do not need any further legislation for this bill to become to become law i been made aware in the last week or so the ways and means undertaken so this question i don't know as a committee but and the democratic caucus there's been some discussion i've not been informed of whether they plan to move a bill or not i would just also say that if you look at the calendar there aren't that plan for fee disclosure and i will support the bill i'm strongly in favor of meaningful disclosure to plan participants regarding what fees are being paid from their retirement plans i think plan sponsors need information in order to make the best choices for their employees however i do have a couple of concerns about how we go about doing it in this bill i think that we have come a long way as we move from thirteen to four disclosures my concern is that the bill calls for disclosing fees the services provided by not off separately we do not want to create numbers they do not have because the numbers may be inaccurate or unreliable requiring providers to separate known market services and then ascribe a fee to those services will require an outlay of time and effort that could rise raise costs of providers i am concerned that increased cost from disclosure is could be passed along from those provided participants as higher fees exactly what we're trying to avoid through this bill i also have concerns about index fund provisions i understand index funds a higher return and low cost and that seventy percent of the industry office them i also think they are great value for today but we do not know what a great value tomorrow will be which is why i concerned about mandating providers to offer them representative angels will be offering an amendment on this issue i plan to support the andrews amendment as i believe it is a good start to work toward a solution on the issue overall mr chairman i hope we can i am i am concerned that even having reduced the number of disclosures from what sixteen before i know the categories administration invest a magic transaction all of their fees that the average participant may have trouble sorting all that i mean to me if you're if you're worried about say mutual funds either one for one k or otherwise you probably should be concerned about your transaction fees both in and out you should be concerned about the overall annual charge whatever that would be and you should know clearly what those are be able to make comparisons you also should be able to make comparisons on returns and history of a door or whatever it may be but i think if we start breaking down too much beyond that like administration and all of the fees or whatever that were  confusing individuals in addition it seems to me that the trustees of the of the four hundred one k s of the corporations which put the sig other have some responsibility in terms of making their decisions and to me that's the greatest problem that they are making a decision to go with high cost operations you know they deserve to be sought out on that if they're making decisions to go with those which are more balance with a good rate of return they deserve some credit for it and i'm also a little concerned about the index fund mandate i mean i'm worried that we're going to start getting into saying we're going to index funds now now we have to do a commodity fun then yet do something else in the future or whatever we're breaking in an area that concerns me somewhat and i what the department of labor is actually doing i do know their concern trying to move ahead as well and i'm also concerned that we're just seeing this for the first time so i'm not the whole concept of what we're trying to do i don't have a problem with the details of that depended upon their personal circumstances the employees pick the right plan and the employer is providing the right i fear that this legislation will have unintended consequences i look at the expense ratio on the four hundred one of my wife i have a military target planned so it's different and i see the expense ratio broken out into four columns i'm not sure i wouldn't just add them back together to see what the overall cost with the i'm worried a bit about the economies of costs if we step away from some potential economies and what some higher total costs might be my concerns on the index is probably a bit less and i am mistreated and congressman andrews proposed amendment on taking a step towards a potentially more choice rather than mandate all that said i could not support this bill if i had to vote for it on the house floor and would not vote for it on the house floor i think this bill has the greatest of intentions more transparency wherever you are is always better just not sure it gets to the point of the consumer having what he or she needs to make the right decision but i'm looking forward to working together to against strand as reserves a point of order mr chairman we've heard extensive discussion today about increasing the disclosure of these charges in for a one k plans both participants and the plan sponsors and that while we may not agree on every detail in this legislation we've heard consensus that improving the disclosure of meaningful information is a worthy goal my amendment targets what i and many others believe is not meaningful disclosure namely my amendment addresses a requirement in the bill that a planned service provider break out the cost of a single service or a component of a service package even when it does not actually sell that single service or component on an individual basis the bill in its current form would require a service provider who sells a fixed or bundled package of services to specify the component cost of each service provided even if those services are not otherwise priced out on an individual basis and even if the service provider is not willing to sell those services to the plan on an individual basis as a result as i mentioned earlier providers  are being asked to fabricate information for the sake of disclosure even when that disclosure has no meaningful purpose what's more under the chairman substitute it appears that these providers would be subject to fines of a thousand dollars per day for failure to disclose the fabricated information that to me simply does not make sense by now we've all probably heard the car analogy but it's an apt when you go to the dealership and they give you a price for the car they may offer additional options for an additional charge and you can choose whether to purchase but you don't get a price for the engine the brakes or the gear shift because the brakes the engine and the gear shift aren't for sale outside the car i know i'm simplifying here but the principle is the same we don't mandate disclosure of information that is someone buying a car and we should not be doing a highly minority as we begin this enterprise of trying to write a good law i appreciate the chairman's inclusiveness and industriousness in bringing us to this point and i appreciate commitment to continue in that spirit as we go forward we began this enterprise by asking for question one have the right to know the charges that are going to be levied against them in the context of a self a specific kind of investment as one of the preconditions and i have an amendment that will speak to that question and then finally we're going to look at the question as to whether  this new provision would in any way affect the liabilities of employers who voluntarily offer i think there's a common consensus that we want to encourage employers to offer these plans not discourage them from doing that i think the my gross return versus my net return as an employee or as an employer when i look at the benefits that my employees will get certain service provider how much of my paying for the cost of administering the plan how much of my paying for the transactions within the plan how much am i paying for investment management money management type services and then am i paying for anything else that doesn't fit the other three description now mr  chairman and i appreciate the fact that the definition of those terms is important as we go forward with this bill that will be working together to try to find the most practical and workable definitions of those categories so that we can achieve the result that i think you want my objection to mr amendment is simply this my concern is that it provides a sort of opt in or opt presented about the clarity of those of those four services and we were clearly willing to continue to work on that we've done so this isn't just about the employee it's also about the employers if you go back to th it was about employers and people managing these plans for employers who were concerned that they were not able to fully and properly represent the cost of those plans to the to the employers or to their workers or where they were getting the best we see a service not just that eighty percent of the people didn't know their fees we see the fifty eight percent employer say they don't understand the fees that they can't tell they can't manage these arista has long required that fees be reasonable and that that that you be able to justify those fees the concern is that in the bundling you're starting not to not present the same kind of evidence you would if you own bundle and i appreciate that that some plants don't want  to providers don't want to do that but the fact is the fact of the matter is they're doing that in most cases for large employers they're doing that for large plans they're breaking out these exact cost they rather not do it for some of the smaller plans but what they are but this amendment would do i don't think intentionally but sort of starts to undermine thirty years of a risk talking about making sure that these fees are reasonable and the disclosure that is that is taking place i appreciate the industry says well there's a cost to a service but we can't price it well if you're big enough they can price it and and i think i think the employees are tired of this and the point you make is important to this understand the only source for the fees in the commission is the money that's in an employee's retirement plan you don't go somewhere else to get this money and as we used to go somewhere else to get them in a state of cost those of all not been shifted onto the employee so the employer who is struggling to put for  five hundred dollars a month or maybe even less much less to put that aside those fees come out of that's why that chart points out that that one percent difference cost that employ a lot and in fact if you look at some of these fees that are not unreasonable in this in this in this in this field i don't know if you have the chart before you but you can end up working some sixty months to try to recover the cost of those fees you know we know that people are struggling to try to improve their savings and what is now become their retirement as so i appreciate the concern that the gentleman has raised we've continued to hone this down we will continue to do so we've continued to work with with the entire the entire retirement community that's not to suggest that there's unanimity about this bill because there isn't but this is a good faith effort to get to a point where in fact we have comprehensible and information for the employer for the plan sponsors and employees be provided but not that it be so arcane and so the luminous that it be paralyzing i think there can be further discussions of what these categories mean but i would respectfully oppose mr mckeon's amendment and support the employees nine employees thinking about putting it up for a one k plan and she's trying to evaluate how much it's going to cost for various options and she goes to one provider and they say well we're going to do all the servicing for free and she goes and looks at other providers and they say we're going to charge x number of dollars for administration x number of dollars for transaction costs and what we want her to be able to do is see whether it's really free or not because it usually isn't that she's going to be able to break out and evaluate before she makes that choice i mean maybe maybe the one that purports to be free is charging seventy five basis points out of the return learnin the one that i think the gentleman trying to put myself in the in the place of that woman or man that has the nine employees and then the nine employees i think at the end of the day what they're going to be most concerned about is how much they're going to end up with at the end of the day through and there are some investment counselors that might charge one percent and some might charge  one charging one percent might generate a ten percent return the one charging my generate a five percent return which is the better option so if you're if you're driven more by  the person that employer has a fiduciary responsibility make a good choice for employees in choosing the plan sponsor and i think that those employers need information that as i said earlier is edifying without being paralyzed i can tell you from experience what they're concerned about is not what all of these individual charges are what they're concerned about is i'm going to put in so much you're going to match what is my return going to be on that investment and and i just think that most of those employees are never going to get into this stuff and i think that you're close to what you're talking about on the  i wasn't one of them i was obviously a general motors we were a much smaller business that we were dealing with and we had other problems to deal with a lot of times the employees didn't want to do anything they were concerned you know human nature is such that if the boss comes to you was something it's going to be better for the boston for the it was mostly we're trying to get them to  make sure they participate in the plan and a lot of them didn't we were matching fifty percent of their investment so right up the top they're making fifty percent if the plan just broke even they were making fifty percent so i  the net at the bottom anyway i don't see any advantage in forcing them to change their way of doing business and possibly charging them a thousand dollar a day penalty  because if you'd ordered a happy meal you would have gotten one price that would have gotten everything you want to rather than order them fast food is not investment advice but the principle is that you can look at buying office and what i would say is just that there were definitely some people who when they had to sit down i mean it was like going to the dentist they had no desire to listen to the information and wanted out of the room as quickly as they could but frankly there were other employees and other  partners of mine who were loaded for bear and filed it like a box score and they did want even more information than what i think that chairman amendment is disclosing so i mean really what we're talking about here is a balance to try and get it right and i think certainly shrinking it from thirteen to four is more than good on the part of the committee and i think it's a very sort of commonsense list of items that included in the memo and and so i think it's certainly with a big number and come down to a number of the still doesn't mean anything you know that's not necessarily a panacea and i still just think if you have people let th sell it bundled they don't they don't break their cost down we're going to force them to break their cost down they can just say i'm going to charge so much for administration i'll charge so much you know they'll have to go through a procedure to do that it's not their normal business practice and their normal practice is to to get you the best deal that they can and compete with somebody else trying to get you the best deal that they can and at the end of the day do you get a ten percent return you get a five percent return to get an eight percent return at the end of the day your guys came loaded for bear that's what they were interested in too just like the ones that didn't want to listen to anything they know that  if they're putting in five dollars a month they put in sixty dollars are they going to have eighty dollars at the end of the year are they going to have one hundred dollars that's with a guarantee and that's what the vast majority are interested in i 'm sure if you rank where the interest level was you're absolutely right and thirteen was way too much and i don't like that original draft of the bill simply saying is that we're clearly seeing movement and a vastly improved direction and maybe for still not the magic number but i think we should at least recognize that there's been real significant progress towards the goal that all the prior speakers have indicated i'm not crazy about them and i think mr andrews amendment is going to move us again in a positive direction as far as that issue concerned i know that the chair like other speakers have said is going to continue to work on that issue which a number of us are still concerned about but again i think the fundamental point about what's too much and what's not enough  at these four categories as you see that this is information that is quite apparent and understandable between the employer and the the provider of the plant and i think for employers again in both our hearings and  discussion with employers and surveys of employers almost eighty percent of employers think think it's important that they understand and yet almost sixty percent of them say they don't understand and they're worried because the question of whether or not they incur some liability because they don't understand it and that's why you have employers and people who manage the plans for them saying we need another way to break down these fees so we can we can make the best inform choices for wasn't pulled out of the hat thirteen wasn't pulled out of the hat it was it was based upon a lot of the concerns that were raised we discussed it with across the industry and with others and with the members of this committee and what and that's what we are but i think you know in terms of the information provided to that employer that's offering this plan i don't think this is that kind of that kind of burden at all and obviously as plans grow change and some fees are based in fee on the size of the plan other fees go down other efficiencies are incurred i think an employer has to know right how that's changing over time and compare it to what what what what other alternatives may be may be available so i thank the gentleman for his remarks and thank by mr andrews of new jersey and then it will be distributed to the members of the gentleman from new jersey is recognized for five minutes to explain his amendment i thank the gentleman and again i want to thank our colleagues in the minority side for the constructive debate that we've had thus far i look forward to continuing in this context as well i said earlier i thought there were four questions we're dealing with in this legislation first should there be disclosure i think there is central un there should be second is what should be disclosed we just had a i think a constructive debate about that the two remaining questions are should any particular investment option be required and what provision should be made with respect to immunizing employers against any perceived or implied new liability that could flow from the legislation in front of us this amendment attempts to address each of those last two questions in a balanced way i have significant misgivings about the requirement that any particular form of investment the included under the law as i think mr mckeon said earlier the idea that there is putting a good housekeeping seal of approval on any particular investment choice is something that i am not in favor of on the other hand  have a lot of employers leave the sponsorship of these plans which is the precise opposite of what we're trying to accomplish here with this amendment says it says that should employers  to offer first of all it says no employer would be required to offer any sort of investment vehicle index fund or what have you the second it says that should an employer offer an index  type vehicle then that employer would be afforded an explicit set of protections against any new or perceived liabilities under the law and let me say for the record it is my interpretation of the chairman's bill that it does not create any new scope of responsibility to an employer i believe it does not i don't believe it's intended to do that and i think the fact that an employer has this information should not be construed by a court or anyone else in serving this is imposing new fiduciary responsibility beyond those which are risk already has imposed one hundred seventy four but in order to clarify that what the amendment do is to basically offer a choice and the employer who opts for the offering of an index fund would be in a position where he or she could then claim this explicit scope of immunity in safe harbor  chairman again has approached this issue in a constructive fair minded way delicate priorities and a lot of competing interests i think he's done so in an incredibly fair way and again i appreciate what he has already done and i know he's very acutely aware of the problem of not weighing in in favor of any particular investment choices objective if i can speak for him for a minute is to be sure employees have a clear choice that they can understand the difference between an actively managed fund for which they pay something and an index fund for which they might get a better result and that's what i think he's trying to do here is commend all of my colleagues on the other side who talked about their anticipation their great anticipation of the andrews amendment and how it would solve greatly the mandate that was included in the underlying bill oppose the amendment and at the appropriate time mr chairman i am pleased to offer a second degree amendment in the nature of the chair would recognize the gentleman now for the purposes of offering that him if he desires to do so great and i have an amendment at the desk of the clerk of designate mr chairman i will reserve a point of order against the second and then there's a point of order a substitute amendment to the amendment offered by mr andrews offered by mr price of georgia man that will be distributed in the general is recognized for five minutes to explain is a minute segments chairman it's clear that the success of four hundred one k plans is u ndeniable we've all conceded that they become truly a primary type of individual account pension plan and the latest figures demonstrate that there are approximately seven hundred thousand four hundred one k plans covering nearly fifty million active employees with total assets exceeding two trillion dollars this excessive for a one k plans have been made possible because most investments under these plans pool the money of a large number of individual investors resulting in greater investment vs diversification and lower transaction costs or economies of scale another part of the success stems from the fact that the employers act as fiduciary when selecting plan investment options employers are acting with the interest of the plan and offer a menu of investment options with various characteristics such as risk and return the underlying legislation in the underlying legislation sections three requires a minimum investment option such as a market invest index fun that new mandate and the de facto mandate ignores the success of four a one k plans and creates a direct threat to the framework of four zero one k plans by directly involving the federal government in the type of financial products offered  my friends on the other side seem to believe that the federal government can is better adapted making investment decisions for individuals than individuals themselves the anders amendment as i mentioned earlier takes a step in a slightly different direction but makes the employer's liability protection contingent upon offering the market index fund centrally threatening liability protection makes it hostage to a minimum investment option so while the other side will argue that there's that this is no longer a mandate common sense again dictates that it's really a de facto amendment mandate and a wolf in sheep's clothing the original intent of this bill is to provide more disclosure on for one k p s i would suggest again that they be anders amendment takes the committee far away from disclosure as possible actually starts this committee on a slippery slope undermining the voluntary nature of the benefits under arista challenges the premise that the success of four one k plans is coming as a result of employers acting fiduciary without government interference employers across the country been capable of picking out various investment options which meet employees short and long term retirement goals remember that those long term or short term retirement goals may differ from individual to individual we certainly here can determine exactly what those goals ought to be with employers in charge of the decision making and not the government the typical for a one k plan offer seventeen different options more than seventy seventy percent as has been highlighted include an index fund on the menu and this has come as a result of placing proper decision making with those who have the most at stake yet all of this is with all of this evidence no one on the other side stop to ask if a market index fund is truly the best option for all employees in fact i would suggest mr chairman that those plans that do not include a market index fund my may in fact get a greater rate of return and we may want to if it were the hand of the other side to dictate what would get the greatest return look at some other area commodities have been mentioned are we marching down that road  again a younger worker has very different retirement goals than an older worker who's perhaps more risk averse instead everyone would get an index fund that happens to be blessed by this federal government i would suggest chairman that we ought to think the gentleman to the question comes on in the stream and i just briefly oppose the second degree amendment under which i'll do very briefly wilson sheep's clothing that's what i appreciate that's actually i've been called a lot worse than that first of all i thank you for opposing my men when it's helpful i would respectfully disagree my friend on two grounds one is that employers do have liability protection this bill does not expand their liability protection what simply the amendment does is make explicit what i think is already in the bill second the underlying my amendment does not require that people choose only an index fund they can have an index fund and anything else they want on top of back and that vote mr klein if you have an amendment you are going to offer that we were going to discuss and you might consider withdrawing we would like to do that now before we go to the floor and then i would say to the to the to the members it would be the intent a disclosure requirements pension plan service providers as well as plan sponsors which has already been confusing in the bill in the hearing let's be clear my plan sponsored would mean the employers who maintain these four one k plans for employees neither one of these requirements controversy we certainly heard more concerns raised today about the burdens and bill imposes on service providers that would be the mutual fund company for us rather than the burdens imposed on the actual lawyers who sponsor these plans my mema focus on helping employers and making sure that we do not drive them out of the business and that's the here of operant for one k plans to their employees we may agree that increase protection for the employers and i think that we've had discussions and you're willing to absolutely absolutely i appreciate the concern and i think it's real in the minds of the people who have raised the concerns and we should we should deal with it and i a whole bunch of allah card things and then he got home and his wife squared away and said you should have bought the bundled right package and i just wonder why you were using that excuse against that i mean that reasoning against bundling well my friend is like a drive through window i use that example because sometimes the bundle package is the best deal and sometimes it isn't and i think people should have the right to make that decision based on all the facts that just offer the reclaiming my time that is exactly by our going and so the ones that are selling the bundled products now should not be forced to break out their program  mr platts mr keller mr keller votes mr wilson mr wilson votes by mr klein mr klein but it's  misses for ox mrs fox i mr cool mr cool that's i mr bishop of utah may i supersize this vote mr beck votes no mrs mccarthy no mrs mccarthy votes no mr tierney mr tierney votes no mr holt mr holt votes no mrs davis mrs davis votes no mr bishop of new york mr platts mr marchant votes no mr holt mr holt votes no mrs davis mrs davis votes no mr davis of illinois mr davis of illinois votes no mr  mr cool votes i am mr bishop of utah mr bishop of utah votes i am mr davis of tennessee mr davis of tennessee votes mr walberg mr walberg votes i listed bishop of new york record of mr bishop of new york is not recorded mr bishop of new york but it's no mrs fox votes no mr cool mr cool votes no mr bishop of utah mr bush bishop of utah votes no mr davis of tennessee mr davis of tennessee votes no mr walberg mr walberg chairman i have an amendment and having sat here through the discussions that we had earlier and i do think that they were very constructive i hope that perhaps this amendment will help i'm sorry i'm sorry chairman i think that for a one k fair disclosure for retirement security act goes a long way towards providing american workers with the information they need to become informed about one of the most important investments they will ever make and i hope that the amendment that i'm  offering will also go a long way towards the discussion that we've had about how to make this meaningful for people how to put it in a context that people can understand employees deserve to know how much in management costs and other fees will be taken out of their contributions over the course of their careers and that's one thing that this deal is attempting to do my men meant seeks to make the requirements in h b thirty one eighty five more meaningful and helpful this is chairman i can log on to the website said many major mutual fund providers and clearly see how much the company will charge me in management fees before investing i can also clearly see how the management fees compare to industry averages in addition to similar mutual funds managed by other investment firms as employees invest thousands of dollars in their retirement funds of the course of their careers they deserve the same access to information as any private investor this amendment will give every employee investing in a retirement plan access to points of reference or industry averages to the investment products offered in their retirement portfolios if a particular mutual fund this is overall management fee is a half a percent and employee deserves to know how this stands up to comparable mutual funds or whether it's above the industry average or below they may not know how to go about obtaining that information and so the goal of my amendment is to help employees put four zero one k fees in perspective and aid them in making informed investment decisions as you know we encourage our constituents to save and invest in their future through the retirement plan survived by their employers and we owe it to them i think to provide useful information that will help them to plan and invest it so this amendment instructs the department of labor in conjunction with the securities and exchange commission to provide a market based point of reference for making comparisons among different investment options and we passed out a sheet to show how that might be  developed for them in addition it also asked the secretary of labor to conduct an annual survey of four zero one k plan offerings and post information about investments made by these plans median rates of return and their fees on the department of labor's website and this is material that they all compile this amendment does not put forth any requirements or targets for management it is only for informational purposes to help chairman over fifty million american workers depend on for a one k plans to fund their retirement over the course of twenty five years just one percent difference mean an extra fourteen thousand in returns on a fifty thousand dollar investment those who are investing thousands of dollars in retirement plans deserve access to this information and i encourage you to support this amendment and i yield back the balance of my time subcommittee chairman about the consequences of this amendment and exactly the specifics of it if i look at again just having received a look at the first page lines is or other investment option that's recommended in the retirement industry recommended by home i guess that means recommended by the federal government i'm not i'm not certain but i  think that this amendment actually may clarify that it is the intent and the desire and the will of our friends on the other side to further expand the influence of the federal government into  it probably does disclose an opening into where the intent of all of this is going which is i think to have greater federal control over the options that americans have  yeah i'm sorry that the gentleman is misreading this because i think that in essence what is trying to do is provide people with more tools and ability to try and see where this falls in the realm of other  ds that are out there the department of labor how is this has information that they can use in this context and i think working in concert with the securities exchange commission to provide this kind of market based point of reference would be helpful it's not trying to put additional pressure or guide people in a way that is not appropriate i think that basically what it's trying to do is just get them information that they need people obviously don't have to use it but if they have an opportune opportunity to have more information we think that that's an important thing to do comparison by that do you mean the stock mix and mutual fund mix or do you mean the fee mix you know this is this is not about performance all we're talking about are the fees the management fees that people pay and in the context of these funds that's around that's what they actually pay that's where the ball what would you  moment i'm looking at this in eod says investment performance comparison in the headings and says it connects with each investment option list in the plan for comparison chart the chart to include an investment performance comparison talking about performance things are entirely different may have a ten point three percent return or fifteen percent return or whatever whereas a cs are more whole different matter altogether i mean seems to me that the amendment doesn't speak to what was handed out here and what is being stated in terms of what is in the memo if one reads it carefully breath we need to have problems with the chairman or something reclaiming my my time i have a deep concern because it does say in fact invest performance and the clauses underneath it refer to that performance and even in a simplified form like we have in our investment plans on the hill you have a high performance you can take more risk less risk medium risk is are you going to have to have performance have international stocks are going to have a high tech and ag this is an incredible inconceivable burden that you're proposing here with the word investment performance comparison it isn't about the fees of as i can see that not appreciate a clarification is presented to me is very clear that it's about fees and not about performance now it may be that in making reference to the bill that in drafting it was necessary to call it a performance i'd like a parliamentary inquiry because it all i know says  under the next provision to a nationally recognized market based index of other investment got options recommend retirement is a better benchmark investment option it refers to investments not to be there is a second if the chair might let me suggest that i too am confused by the wording of the amendment i have discussed the amendment with the gentlewoman prior to the introduction of this and the staff discussed this and i think as we understand as we understood it we originally thought it was relatively non controversial but i think members are thrown off and i don't know this actor not because i don't want to pass judgment but the the english language here whether this is about investment performance or whether this is about a comparison of the cost of the generally recognized national funds the s and five hundred a liberal the russell two thousand fund but i think it's open to interpretation and i think i would ask the general if you might withdraw the amendment because i think it was there was a lot of general support for it but i think in  and when you talk about if you were to prevail and you continued bundle services you'd want to know if you had a index fund or russell one you'd want to know how my compare to the average of my way out of whackers is good enough for the like again we're talking about the story of an elephant where you get the three blind people feeling an elephant describing it in totally different ways and nobody coming up with really knowing what an elephant looks like i look at  this and if this is all you had there is no way to judge the mutual fund performance because a global fund that cost average one point seven two percent might have had a great year actually returned twenty actually i think it works actually the language for the very reasons because it's saying that for each of these things where we have a comparison of there should then be conducted a performance i mean i don't necessarily have a problem with that but the discussion by general in california was about fees and the writing that i'm looking at is about investor performance you may want i mean you may want to know your fees you may want to know your best performance when you go to morningstar somebody they'll get that for you in an act of a hurry maybe it could be a pain but the but the you know i just want make sure that we are enacting the legislation that we think we're not being i don't see that quite happening with this amendment right now the gentleman you'll have to have i mean it may be that this is going to be subject to more clarification but i think it is in fact talking about both dimensions in the chart you have is comparing fees and the language in connection with each of those options that are comparing comparing fees you want to understand how that particular fund performed so you can judge whether the fees you're spending on that particular option different things and they could obviously be combined and i think there's a little bit lack of clarification of what would go into the legislation we would do adopt this amendment you know it may be right that we need to include both i'm not necessarily objecting to that i'm just saying that he ought to be clear as to what we are doing now about one hundred percent sure this really speaks of defeat so much as the performance i yield to mr mccance thank the gentleman for yielding and i go back to my opening statement for the markup that the procedure here has been somewhat flawed and if we had had a little more time to fly some of the stuff out we might have be able to understand this better but what you're talking about i believe is that these are these are maybe taking the whole group of funds but comparing them with your individual so you that wouldn't work either because if you've got your individual fun and it happens to be a global fund you might have a one percent fee you might have a two percent fee so if you if you took your global fund and then measured it against this it still wouldn't show you exactly how you're how your performance was  american and that would be the social security program a program that certainly includes or provides a an invaluable resource for all beneficiaries millions of americans rely on this program however as every one of us knows the basic structure of the program is fatally flawed as today's workers support today's retirees as affirmed by the so scary trustees report so security system is one of the greatest long term challenges facing our nation and in fact the trustees report highlights the scope of accelerated spending growth in the program and provides a very sober outlook for future beneficiaries if action isn't taken with our reform social security  fiscally sustainable in less than ten years cash flows are projected to turn negative in the trust funds will be exhausted by twenty forty one this means that runaway entitlement spending is a generational crisis requiring a generational solution i recently met with a group of students high school students in my office and in fact oftentimes when i meet with them one of their questions is about social security without even prompting and it's because they understand the challenge that the program has when federal reserve chairman ben bernanke he was asked recently how urgent it is to address the long term imbalances in the entitlement programs including social security he said quote the right time time to start is about ten years ago unquote however i would suggest this congress seems content to perpetuate the broken status quo as you'll recall in the hundred ninth congress the administration and republicans at least started a dialogue and initiated ideas on how to institute long term reform in fact it's amusing to me today one of the things that we put forward on the table was an index fund as an alternative for some social security investments  and we floated that idea out there and we were told that this index fund was just too risky by many of our friends on the other side but it seems that the index fund is not too risky for the four one k plans as they presented today sadly that the action has continued in this congress without action by the congress however we put forth a budget blueprint calling for measures to make major entitlement programs more sustainable savings in reducing waste fraud and abuse in contrast our friends on the other side album passed a budget blueprint which didn't contain a single iota of entitlement reform and instead created a number of funds to spend on new projects while raising taxes on the american people which leads us to today still no plan to address the long term solvency of social security our we've got a lot of time to adopt potentially significant onerous new requirements to underwrite undermine the private retirement system in our country one might wonder if the goal is to ensure that the private for one k plans are run as well as our social security system that clearly needs repair if that's going to be the case however tha americans should at least have an opportunity to gain a sense of how their for one k plan stack up against the social security system this amendment does two things lets every four a one investor know the fiscal challenges that are facing social security and it also lets every four one k investor know whether congress is doing anything to address the system's long term solvency i think it's a commonsense amendment certainly something that the folks in my district ask about including those young the subject matter of the bill is to require new rules and regulations that affect retirement savings plans under this bill indirectly regarding investment performance comparison this is to a one mr price is that correct that's correct mr chairman mr sanders i would reserve a point of order in the new jersey reserves a point of order the amendment is being distributed the gentleman is simply states that there ought to be greater information for comparison for individuals regarding investment performance information is readily available and provided by the so scary trustees report urges adoption and  and they want to be heard on this on this amendment here i would just say not so much on the second on this this a member of the certainly on the first amendment you know i just find it rather interesting to be lectured to by people who control the white house and congress for eight years who inherited a five trillion dollars surplus we were putting money back into the social security trust fund there was a question of whether we'd ever need thirty year bonds again and there was a rosy future and now that's a eight trillion dollar deficit and we're again borrowing from the social security trust fund that have been for the last eight years so it's complete control the government somehow you weren't able to get it done but also it's rather interesting you know as economic cycles go we had a we had a bubble bursting tech bubble in two thousand and hundreds of thousands of americans more than that millions of americans that thought that they were going to retire in the next year or two found out they had to postpone their retirement because their four hundred one k s took a plunge because for a one case ride with the economic cycles now and what do we picked up the front page of the wall street journal last week in the middle of the front page was a long story about people all over the country who are now postponing their retirement who are looking for second jobs who are extending their they've gone back to their employers and told them that they can't they can't retire why because billions hundreds of billions of dollars have been lost in market capitalization their funds have lost huge value however they invested across the board unfortunately this this bubble has affected a very wide path in our economy and you know what they're not post point of retirement because social security lost money they're postponing the retirement because their investments lost money and so it's that balance between social security and investment plans like four hundred one ks some of us are here to be here long enough to remember  cases were never meant to be a retirement plan they were meant to be an enhanced savings plan you would have your you'd have your retirement plan you'd have social security and then you'd have we would encourage you to save more on your own and you have three legs of the stool one of the legs is fast disappearing find benefit plans by default for a one k plan to become the retirement plan but they don't have the stability of a defined benefit plan they don't have the stability of the social security plan and therefore they're far more volatile and so when you say you want to compare the two you're not comparing apples and apples you're comparing a solid plan this never fails to make a payment the providers benefits way beyond retirement in terms of disability and the other benefits survivor benefits as so you can set up this comparison all that you want but you're not going to fool the american people we had this debate a number of years ago when you made an assault on the social security system and the longer you made  the more people you lost you know when the president announced a plan eighty percent of people thought it was a great idea he went on the road for sixty days he came back and he barely registered thirty five percent of the people we suggested we'd pay is way to stay out of the road for another sixty days so you can put up these kinds of amendments which are not going to fool the american people they know what they can trust they know it's what they're where they're with their grandparents and their parents have trusted and they know what will be for the there for them is i mean we have no responsibility to reform the system to improve the system absolutely we do and we'll continue to work on that just as you tried not to make it easy let's not pretend this somehow it's a fair trade the american people to trade in social security years to one year we were given the majority and in one nine hundred ninety four granted we made some mistakes but the dow jones was thirty eight twenty today it's twelve six nineteen and it's had a real tumble since the first year i think we all acknowledge that and i think when you've lived as long as i have you have seen the dow go up and down and yes if i were to retire today i'm not as well off as i was in october but in october i was a heck of a lot better off than i would have been if i had retired in one thousand nine hundred four so there are there are different things that go into this and talking about social security i remember when freshman member of our class three years ago tried to reach out and get six members from each party just to get a meeting just to talk about social security and the now current speaker told your membership to not attend the meeting two of them still did and i take my hat off to them but we couldn't even talk about it you know and i think we all know that it's pretty hard to address social security i take my hat off to president bush for at least trying to get a debate going and i think that  you know it's unfortunate that your side didn't join in and engage in a meaningful debate because it almost is going to have to be a second term president to even bring the issue up and we all know that it's critical that it that it be resolved and you don't resolve it unless you can talk about it so i think mr chairman i think we've had a reasonable discussion here this afternoon in a reasonable tone but again lecturing can go both ways  chairman yes i you know this lecturing business you know there's lectures and then there are facts i recall when that vote came up when president clinton asked u s to cut two hundred fifty billion of programs that i felt were very important in my district i was reluctant to do it i thought it was going to take away some of the benefits that people need it but i bit the bullet there was a two hundred fifty billion dollars cut on the top one half of one percent and that five hundred billion dollars cut cut it went into a trajectory that put us up on that eight billion dollar trillion dollars surplus that we had not one single republican voted for that plan you would require i don't know if you hear that or not but if you were here you remember you voted against it and that plan put us on a road of having not the grand robin smoke and mirrors stuff they did before but a real honest move towards  of our government and it spending and as the chairman said we had defined benefits but the greed that we take our country down right now is the same greed that and sad where they said they didn't want to fin no faith or confidence in the future and i don't know what out of this lecture series business started but we need to look at the facts and we could see that there was a very strong  plan that went into effect that have been as we've seen with this president executive branch every single program whether it's international we can't even get ten percent of egypt to feel that we are friend may get billions of dollars a year program after program at the program has been a failure as a result of this eight year fiasco that we've had in the white out you know back like you i'd like you  d in that endeavor there are a number of items out there bills out there that would do just that and i look forward to working with you on that i also just want to relate to the committee that to the understanding that i had as i brought these amendments forward was that if the the one were withdrawn which i did that this one would be accepted and i know that there's been a bit of a firestorm here i prefer that and i know that minds can change but  my understanding is that i think it's important for the committee to know that my understanding is in bringing this amendment forward that they did that it would be allowed to move forward and i again i appreciate that minds can was recognized for five minutes i thank the chairman i wanted to follow up on the comments from mr mckeon the other gentleman from california and i think he makes a great point in there to take a look at what the stock market has done over the past fourteen or fifteen years rather than just one year and just to pick a random date from january twentieth one thousand nine hundred three in the following eight years the stock market went up two hundred twenty six percent and in the seven years and three months since then the stock market has gone up sixteen percent so i think that is a good point to make all right you guys ten thousand five hundred chairman i think the problem with this amendment is that it basically compare two totally different concepts that's the point social security system was never designed as a retirement system it is a social insurance system when it was conceived in the mid thirty's average life expectancy was sixty two years old which meant on average nobody recovered it's like any other insurance system that some people benefit from everyone pays into it comparing it to a private retirement or savings plan you're basically deceiving the public because you're comparing two things that are a totally different concept and i think that's not helpful to the american investor that's actually counterproductive and misleading  was handed out for ms davis is a member point set out that may be different based upon return and when you're comparing apples to oranges and you're expecting individuals to make decisions on their investment based upon something that is very narrow in scope the federal reserve bank of san francisco and it's a little dated but it it in actuality the fed looks bad as it describes the rates of return from social security and defines very specifically what it states as the the rate of return  from the federal reserve bank of same sisko quote that today's quote today's middle income workers can expect real rates of return between one and two percent today's highest paid workers can expect real rates return below one percent and may even face negative rates of return of born after  seventy five unquote so there is information that's out there about rates of return on so scary that i think would be valuable and important for americans to reclaim my time i would agree with that i don't quite know how they base that what they base it on because they're in the lack of investment but  i mean i thought it was just sort of raised by something we might do or they might do or something of that nature as opposed to any actual rate of return so it sort of catches me by surprise it's even there i'd like them more about it but i will y mr holt mr holt votes no mrs davis mrs davis votes no mr davis of illinois mr davis of illinois votes no mr votes no mr bishop of new york mr bishop of new york both snow miss sanchez mr hare mr hare votes no miss clark miss corke both snow mr courtney mr courtney votes no miss shape order machine porter votes no mr marchant mr bush standing mr bush stanny votes i am mrs fox mrs fox but it's mr cool mr cool that's mr bishop of utah mr bishop of utah votes mr davis of tennessee support the bill thirty one eighty five to the house of representatives with an amendment in the nature of a substitute with a recommendation that the amendment be agreed to and the bill as amended do passed the question is on on mrs bigger boats no mr platts mr keller mr keller votes no mr wilson mr wilson votes no mr klein mr kline votes no he votes no mrs fox mrs fox votes no mr cool mr cool votes no mr bishop of utah mr bishop of utah votes no mr davis of tennessee mr davis of rule house rule levon clause two i that all members have requisite number of days to file additional or minority views on both bills reported today without objection so ordered the committee stands adjourned thank all of the members and the staff