Fee disclosure regulations went into effect in 2012 for 401(k) plans but, a year later, do plan sponsors and plan participants yet know what they are paying in fees?
The LIMRA Secure Retirement Institute has conducted consumer surveys since July 2012 when the Department of Labor's fee disclosure rules went into effect. Its first survey took place just before the participant regulations were implemented. At that time, 50 percent of retirement plan participants said they didn't know how much they were paying in fees and expenses. One year later, a follow-up survey tells the same story, LIMRA said.
"The disclosures have had little impact as there is no noticeable difference in participant knowledge of the fees they pay," the LIMRA report found. Fully half of plan participants do not know how much they pay in fees and expenses and nearly four in 10 think they don't pay any fees or expenses.
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That said, LIMRA believes the fee disclosure regulations are still good for the industry because it lacked transparency before. It would like to see disclosures accompanied by education and guidance.
When asked how much they pay in fees, only 12 percent of defined contribution plan participants were able to estimate a percentage. One-third of these participants thought they were paying more than 10 percent in total plan fees.
Previous research by LIMRA Secure Retirement Institute found that one in five consumers contributing to DC plans or IRAs say they rarely or never read retirement plan disclosures and only one in three spends more than five minutes reading disclosures.
The latest figures show it isn't inadequate disclosure that is the problem, but a problem where participants don't examine their plan unless they are going to make investment changes, the report's authors stated.
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