The Government Accountability Office (GAO) recently conducted a study on retirement plan participants’ understanding of the fees they pay within their retirement plan. The Department of Labor (DOL) currently requires retirement plans to provide certain information through annual fee disclosures. The findings from the survey were released in July and found that 40% of participants do not fully understand the information regarding the fees. In addition, it found that 45%, based on the required notice, are unable to determine the cost of their investment fees, and 41% don’t even know they are paying fees.
The report focused on how well participants understand and use the disclosures, described disclosure practices seen in other countries, and examined additional steps the DOL could take to improve fee disclosure.
Five recommendations to the DOL came from the report:
- Require the use of consistent terminology for asset-based investment fees.
- For quarterly fee disclosures, provide the actual cost of any asset-based investment fees that are paid.
- Provide participants information detailing the cumulative effects of fees on total savings over time.
- Require fee disclosures to include fee benchmarks for in-plan investment options.
- Include ticker information for all in-plan investments (when available).
The DOL is not required to act on the recommendations in this report. However, the current fee disclosure requirements would benefit from a review and enhancements. Whether these recommendations or other ideas are ultimately adopted, improvement in the fee disclosures will ultimately benefit plan participants.
For more information, you can visit the GAO site here.
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