So the final days before Aug. 30′s first deadline for 401(k) participant fee disclosures are underway, and there's already good evidence that the extra information will be helpful – but probably totally ignored by most.
That's the consensus of LIMRA's recent study, which suggests that two-thirds of Americans with DC plans or IRAs spend less than five minutes reading the disclosures they've already been receiving. And one in five say they completely ignore the paperwork.
As has been evidenced in other recent research, younger employees – who sense they'll probably be shut out of Social Security benefits as they age – say they do actually spend more time reading their disclosures, and are also more likely to proactively seek out information on their plan from their employers. Older employees, not so much.
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LIMRA says its survey also suggests that full disclosure is going to do very little to motivate those already unmotivated participants. Asked what they would do if they found out that their fees were higher than average, just one-quarter said they would move their assets into a lower-fee fund and a fifth said they would contact their employer about lowering the fee.
Nearly half said they would take no action or would have no idea what to do.
As well, just 12 percent of plan participants said they could currently estimate the amount of fees they pay on their retirement accounts, or didn't know they paid any fees at all. Of those who made an educated guess, 56 percent said they believed their fees and expenses were more than 2 percent: a 2011 Investment Company Institute study suggests that's more than double the all-included median fee for most of America's DC plans.
"This study underscores consumers' lack of understanding about how their retirement plans are administered," said Alison Salka, corporate vice president of LIMRA Retirement Research. "This offers an opportunity for plan sponsors and providers to educate participants on the value and benefits of the plan."
LIMRA also found that men are slightly more likely than women to take no action if they discover that they are paying high fees (19 percent versus 13 percent), whereas more women said they would simply not know how to react to the news at all (36 percent versus 26 percent of male respondents).
LIMRA said it will continue to survey participants as the fee disclosures go into effect and see if the additional information changes their opinions – or behavior.
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