Investment Fee Disclosures Leave Most Participants Unmoved

A “snapshot” survey conducted in October found the start of disclosure of fees from retirement plan service providers spurred little change in the behavior of either plan participants or sponsors.

A total of 176 defined contribution plan sponsors responded to the Plan Sponsor Council of America’s survey, launched a few weeks after sponsors began disclosing fees to plan participants at the end of August.  Third-party administrators and other service providers had to start reporting their fees to plan sponsor clients as of July 1 of this year. 

Among the survey’s findings: 

• Almost 96 percent of plan sponsors responding found no change in participant behavior as a result of the disclosure of fee information.
• An average of 1.4 percent of participants asked questions about the fee disclosures they received from their plan sponsor. The majority of respondents, in all plan sizes up to 5,000 participants, said they received no questions from participants on disclosure.
• Just over 15 percent of sponsors sent out a request for proposal or request for information because of the fee disclosures. Plans with 100-999 participants had the most sponsors reporting they issued RFPs and RFIs, at 25 percent. Plan sponsors are supposed to issue such requests as part of their due diligence in checking the reasonableness of the fees their participants are paying.
• The most commonly reported action by participants as a result of the disclosures was to change asset allocation, and only about 2 percent of sponsors indicated such changes. 

“Clearly, the results raise questions about the costs incurred in complying with the regulations,” said Bob Benish, PSCA’s interim president and executive director, in a press release. “The survey results echo what we have been hearing anecdotally. Participants are receiving their notices, but they aren’t calling or asking questions. Participants either aren’t reading the disclosures or they don’t seem to be surprised by the fees they pay.”

Finding out More

For more information about plan expenses, including fee disclosures, see ¶285 in The 401(k) Plan Handbook. Click here to see this story on Thompson’s HR Compliance Expert.