Reforms in works for 401, by Kathleen Pender, San Francisco Chronicle, Tuesday, August 1, 2006.

The House of Representatives passed a pension bill Friday designed primarily to shore up underfunded defined-benefit plans and head off a government bailout. But it also will make some important changes to 401(k) plans. The most controversial provision would let the same companies that run 401(k) plans — such as mutual fund, brokerage and insurance companies — advise individuals on how to invest their accounts.

Companies that manage 401(k) plans want Congress to let them advise employers on which funds and other investments to include in their plans. This is not permitted today because you can guess which funds they’d be inclined to recommend. Instead, employers can either choose 401(k) offerings themselves or hire an independent adviser to help them.

The American Society of Pension Professionals & Actuaries, which represents independent plan advisors, lobbied to keep this restriction in place and won. It argued that its members would steer employers toward good funds.

“Their argument was bad advice from a good set of funds is better than bad advice from bad set of funds,” says Jon Chambers, an independent plan adviser with Schultz Collins Lawson Chambers in San Francisco.