ERIC memorandum template
ERIC
Congress

THE ERISA COMMITTEE

<nobr>Apr 22, 2009</nobr>

ERIC Urges Comprehensive Rewrite of Miller Fee Disclosure Bill

Washington, DC -- The ERISA Industry Committee (ERIC) today urged a comprehensive rewrite of House Education and Labor Committee Chairman George Miller's 401(k) Fair Disclosure for Retirement Security Act of 2009. The bill, which was introduced yesterday and is the subject of a hearing today, would create a complex fee disclosure regime that would ultimately confuse participants and dramatically increase the litigation risks already facing 401(k) plan sponsors, according to ERIC.

In a statement to the committee, ERIC expressed support for enhanced fee disclosure, but warned the committee that any new disclosure regime must be meaningful to participants and not overwhelm them with voluminous granular data that has little impact on a participant's investment decisions. ERIC urged the committee to simplify the disclosure requirements of the bill so as to not produce lengthy disclosure that are unlikely to be read.

"While we appreciate the committee's efforts in responding to our concerns about prior fee disclosure legislation, we ultimately feel that the new bill fails to adequately address those issues," said ERIC President Mark Ugoretz. "Participants today are discouraged from reading the pages and pages of documents that current law requires them to be provided when selecting 401(k) investments. The proposed bill would make this unfortunate situation even worse."

ERIC expressed concern that the Act would encourage new opportunities for trial lawyers to sue plan sponsors. While the bill places civil penalties in some cases on plan service providers, ERIC envisions participant suits disputing whether plan sponsors knew or should have known that the information provided by service providers was inaccurate as well as disputes over whether component fees or revenue sharing were unreasonable.

"Too much of this litigation is made up of 'strike suits,' argued Ugoretz, "that are engineered to force plan sponsors into expensive settlements rather than undergo the rigors of years of litigation. Increased litigation is a disincentive to create or continue plan sponsorship. Recent studies indicate a significant increase in litigation against plan sponsors."

"Plan sponsors are already facing an increasing threat from law firms that advertise for 401(k) participants as clients. Many of these baseless lawsuits over, in many cases, practices that are widely considered to be lawful are costing employers hundreds of thousands or even millions of dollars in legal fees. Any bill that provides new opportunities for litigation should be of concern to anyone supporting increased retirement plan coverage," said Ugoretz.

A copy of ERIC's written statement is below.

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For more information:
Ted Godbout
Manager, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400
Fax: (202) 789-1120
tgodbout@eric.org
www.eric.org

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The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

Text Files:

ERIC Hearing Statement


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