Labor Dept. eyes reports of advisers exploiting retirees

[Omaha Steve]

http://www.investmentnews.com/article/20101010/REG/310109950

Sunday, October 10, 2010

Asks whether some are prodding workers to transfer 401(k) assets into high-fee funds in IRAs

By Mark Schoeff Jr.

The Labor Department is reviewing concerns raised about advisers hired by companies to advise workers about retirement decisions taking advantage of employees when they convert 401(k) money into individual retirement accounts.

“We've gotten a lot of questions from Hill about the communications around what information people are given at the time they're ready to take the distribution,” Phyllis Borzi, assistant secretary of labor and head of the Employee Benefits Security Administration, said in an interview following congressional testimony Thursday.

The questions mostly focus on potential conflicts of interest when exiting workers seek advice on whether to transfer their 401(k) money into an IRA, she said.

“We're looking into it,” Ms. Borzi said. “I don't know what we're going to do with the information.”

The agency is receiving in-quiries as to whether conflicts crop up when financial advisers encourage departing workers to choose the rollover option, Ms. Borzi said.

Another question is, do conflicts occur when an adviser offers suggestions about what particular fund departing employees should put their 401(k) money into?

“ the advice is to move it to funds that have much higher fees ... there are potential conflicts of interest there,” Ms. Borzi said. During her testimony before the Senate Health, Education, Labor and Pensions Committee, she said: “This question of disclosure is really important.”

FULL story at link.