WASHINGTON, D.C. | June 17, 2009
The Subcommittee meets to mark up two bills this morning. This is truly a rare occasion – in fact, it’s the first subcommittee markup we’ve held since the beginning of the 110th Congress. Since we do have a number of items on the agenda, I will keep my remarks brief this morning.
As I indicated, we are addressing two bills, both of which relate to the regulation of our nation’s 401(k) system. The first bill is one with which we have all become very familiar: legislation sponsored by our full Committee chairman, Mr. Miller, to implement a new disclosure scheme for 401(k) plans, while at the same time dictating the content of those plans. The bill we consider today is very similar, if not identical, to legislation voted upon in the full Committee last year. I could not support that bill then, and I cannot support it in its current form this morning.
To be frank, I am disappointed that the bill before us does not address some of the concerns raised last year – by Members on both sides of the aisle. As Members may recall, I offered an amendment at last year’s full Committee markup to address the issue of plan sponsor liability by providing some legal protections to plan sponsors who “follow the rules” in this new disclosure scheme. I withdrew my amendment last year on the understanding that our staffs would try to collaborate on a mutually agreeable compromise. I understand our staffs have met but did not make progress on this very important point. I hope to see genuine progress made before we bring this bill to the full Committee.
Unfortunately, the liability issue is not the only shortcoming facing us today. The bill before us still puts Washington in the position of dictating one business model over another – choosing the specific investment options 401(k) plans must offer. We had lengthy discussions last year over the bill’s preference for the provision of “unbundled” plan services over all-in pricing arrangements favored by many plan sponsors. At that time, Members – again on both sides of the aisle – expressed concern with the bill’s requirements, but little has changed on this point.
Finally, the bill before us this morning still requires plan sponsors to offer a very specific investment option – in this iteration, a “passively-managed investment,” that tracks the equity or bond market. Put another way, we are requiring – as a matter of federal law – that every 401(k) plan offer this option, which ignores the fact that close to 75 percent of plans already offer such an index fund – ostensibly in the name of “disclosure.” To me, that just seems like more of Congress and Washington dictating down to the micro level how employers must structure their 401(k) plans, irrespective of their needs, or those of their employees.
For these reasons, I cannot support Chairman Miller’s bill at this time.
The second bill before us is not one we’ve seen before. Indeed, despite this Subcommittee’s fairly active hearing schedule, this bill has not been subject to any hearing – in this subcommittee or at the full Committee level. That’s a shame. In fact it is more than a shame – it is a disservice. We have missed the opportunity to carefully examine a particularly complicated area of the law.
The landmark Pension Protection Act of 2006 was enacted with broad, bipartisan support in both houses of Congress, and signed into law in August of that year by then-President Bush. The Pension Protection Act, which I was proud to support, included a number of critical provisions designed to ensure the long-term solvency of our defined benefit plan system and increase participation and savings through our nation’s defined contribution system.
It also included key provisions – which were heavily negotiated between the House and Senate, Democrats and Republicans– that allowed, for the first time, quality, individualized investment advice to be made available to 401(k) participants. I supported those provisions then, as I do today.
Now I understand that the Chairman does not support those provisions – that is his prerogative, and his right, as it is to bring forth legislation to strip them from our pension laws.
I am troubled, however, that the bill before us may do far more than that. It would be a fairly simple matter to simply strike the investment advice provisions of the law added by the Pension Protection Act – an effort I would not support. But instead we have before us almost 30 pages of legislative text, much of which is brand new, and very little – if any – of which has been subject to serious legislative scrutiny. I am concerned with the consequences of some of these provisions, their impact on existing plans and programs, and, ultimately, the ability of plan participants to obtain the individualized and tailored investment advice they so desperately want and need.
For instance – and I understand that the Chairman will offer an amendment in the nature of a substitute this morning that will touch on some of these issues – I am concerned that the bill may have the unintended effect of disrupting investment advice arrangements that have been operating lawfully for almost a decade. I appreciate the Chairman’s assertion that the revised bill he will offer will maintain those programs as they exist today, but in the short time we have had to review this text, it has been suggested that the actual legislative text may not accomplish this goal.
I am equally concerned that in trying to hyper-regulate exactly who may give advice to whom, and under precisely which circumstances, we may end up with less investment advice, at higher costs to participants – certainly not anyone’s idea of a good outcome.
Finally, I would suggest that as with the fee disclosure bill we discussed earlier, it appears that this legislation favors one business model – the ostensibly “independent” advice provider – over firms that already provide advice and financial services in compliance with existing regulations. Again, I submit this is not a decision Congress should be making.
It is on these grounds that I oppose the Chairman’s legislation. As we move forward in the legislative process, I am hopeful we can find common ground on these points, and I will certainly approach those efforts in good faith. But as they stand this morning, I cannot lend either of these bills my support.
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