Fixed income plans may be required in 401 (K) schemes


Fixed income products or annuities may be used as a requirement in the 401 (k) plans. The officials of the House Education and Labor Committee are considering the move to introduce the requirements as a step towards reformation of the 401 (K) plans.

Officials say that these requirements were needed to reform the 401 (K) plans which have been plagued by the present economic down slum. Only a third of the 401(k) plans consist of fixed-income options. Officials said that the proportion is very small and as such it needs to be made more.

Last year, the Education and Labor Committee had said yes to a bill which needed more disclosure of the fees involved in the 401 (K) account. The committee is considering similar types of legislation.

If the new legislation is put in place, all the 401(k) plans will require to have at least one low-cost index-type fund. Around 70 percent of the 401(k) plans have an equity index fund option. Under the new legislation, fee rules will also be included.

In addition, disclosure of the revenue payments by the plan providers to the mutual fund companies will also be included in the 401 (K) plans. All these, experts say, are steps towards a better and reformed 401 (K) plan.