Posting by Fabricia Edwards, CPA
P: 301.272.6054 | E: firstname.lastname@example.org
The 408(b)(2) fee disclosure regulations took effect last summer, and the 401(k) industry braced itself for outcries from plan participants as they reviewed their plan fees for the first time. Instead, these long-awaited statements seem to have flown under the radar with very little reaction from participants and only a slightly higher level of awareness regarding the existence of the fees.
It is unclear what is causing the non-reaction. The participants may be confused by the new information or perhaps not even reviewing it. Some sponsors have struggled to clearly communicate service provider fee information without clear standardized reporting guidance.
At the very least, these new regulations are creating a heightened awareness regarding the presence of 401(k) plan fees. Prior to the fee disclosures, 38% of individuals believed there were no fees associated with their retirement plan. That number has now dropped to 22%. But, when asked to estimate their plan fees, participants grossly overestimated – with 42% of respondents stating that they pay 10% or more.
Another change brought about by the disclosure regulations regards the actual plan fees. According to Fiduciary News, there is anecdotal evidence from several sources that plans have begun to lower their fees. At the very least, service providers are receiving more questions and inquiries from plan sponsors who want to more fully understand how the fees work.
While there is relative silence so far, the impact of the 401(k) fee disclosure regulations is far from over. These disclosures will continue to be a focus as sponsors look to properly fulfill their fiduciary duties and the industry looks for more effective ways to increase financial literacy and ensure adequate retirement savings for plan participants.