Government red-tape is keeping millions of American workers in small firms from saving for retirement, a U.S. mutual fund trade group executive said on Wednesday, limiting a huge potential market for the $11.7 trillion industry.
“Any employer thinking about offering a 401(k) plan today encounters a profusion of regulatory requirements, head-scratching complexities, and sobering legal liabilities,” said Paul Schott Stevens, president and chief executive of the Investment Company Institute (ICI).
Stevens was addressing the trade body’s annual meeting here.
“In the last 25 years, the IRS and the Labor Department have added hundreds of pages of rules that an employer running a 401(k) plan has to follow. Today, 56 percent of small private sector employers do not offer a pension plan, in part because of the administrative complexity involved,” Investment Property he said.
401(k) retirement plans, in which fund management companies invest the savings for a fee, have been significant contributors to the growth of the mutual fund industry’s assets since they were first introduced in 1981.
These plans have provided mutual funds with $1.67 trillion in assets as of end-2007 against $35 billion in 1990, according to the ICI.
Their importance to the mutual fund industry has grown this decade as employers are increasingly ending their traditional defined-benefit pension plans in favor of 401(k) plans.
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