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Labor Department Proposes 401(k) Fee Disclosure

The Department of Labor on Tuesday proposed requiring 401(k) plan fiduciaries to supply investors with standard account summaries that will clearly state fees, expenses and any administrative costs such as legal, accounting and recordkeeping charges-in actual dollars. Plans will also have to provide performance figures and comparable benchmark returns, information on investment options and how to obtain more detailed information, including education and/or advice.

The Labor Department projects the disclosure will result in $6.1 billion in savings for investors between 2009 and 2018, a third of it due to lower fees due to increased transparency. That works out to a savings directly related to fees of $2.1 billion, or $225 million a year.

The other two-thirds in savings will be employees' time, as they will no longer have to search for the information in various places, according to Bradford P. Campbell, assistant secretary for the Employee Benefits Security Administration.

"Our proposal is consistent with public consensus that workers need clear and concise information, not dozens of pages of ëlegalese,' about the investment options available under their plans, and that they would benefit greatly from having that information in a comparative format," said U.S. Secretary of Labor Elaine L. Chao.

"One of the department's top priorities is improved disclosure to workers that will give them the information they need to make informed investment decisions."

The new regulations will go into effect on Jan. 1. Those wishing to comment on the proposal may reach the Department of Labor electronically at: or, or by mail: Attention Participant Fee Disclosure Project, U.S. Department of Labor, Employee Benefits Security Administration, Room N-5655, 200 Constitution Ave. N.W., Washington, D.C. 20210

SEC's Atkins Tackles Shareholder Rights

In his last public appearance as a member of the Securities and Exchange Commission, Commissioner Paul Atkins said that, with regards to shareholder rights, the agency "would be wise to continue to respect the principles of federalism and avoid the temptation to exceed the limitations on its authority delegated by the Congress."

Speaking last week before the U.S. Chamber of Commerce, Atkins addressed a controversial change to the SEC's Rule 14a-8, which lays out the circumstances under which shareholder proposals may be included in proxy materials. The rule allows shareholders who own a small quantity of a company's stock to have their proposals considered alongside management's in proxy statements for presentation at annual or special shareholders meetings.

The modified Rule 14a-8, proposed in July 2007 in response to a ruling by the U.S. Court of Appeals for the Second Circuit, would permit shareholders to propose proxy access bylaw amendments if they hold at least 5% of the company's outstanding shares. While the proposal, the so-called "long release," was not adopted, Chairman Christopher Cox indicated that he may revisit it once the SEC has five members in place, with the goal of establishing a rule prior to the 2009 proxy season.

Since last year, the SEC has been operating with three Republican commissioners and no Democrats. Late last month, the Senate unanimously approved three new commissioners-Democrats Elisse Walter and Luis Aguilar, and Republican Troy Paredes-allowing the agency to once again operate with a full complement of commissioners.

Atkins said he is worried that the SEC might inappropriately seek to infringe on state laws governing the relationship between shareholders and the corporations they own.

"My most significant concern is that the Commission could try to move to adopt a final rule based on the long release without additional public notice or comment," he said. "The long proposal was controversial with almost every group commenting on it. It suffered from concerns as to the SEC's authority to do it, plus it undermines the proxy disclosure and solicitation regime."

Atkins also attacked what he called the "abusive use" of the shareholder proposal process by some institutional investors.

"What we are basically seeing is large institutional investors pushing behind the scenes particular measures that fail at company after company when actually put up for a shareholder vote," he said. "We must be vigilant that the shareholder proposal process does not result in the tyranny of the minority."

The worst approach, Atkins added, would be to try to adopt with little warning a new rule similar to the long release.

"The Commission has not had a good track record recently of adopting controversial rules under dubious assertions of authority," he noted.