It’s deja vu all over again. Nearly a year after the government rolled out its final 401(k) fee disclosure rule, life for 401(k) investors looks about the same. How can this be?
It’s really pretty simple and it all revolves around expense ratios. Ashlea Ebeling wrote about this back in March for Forbes.com:
The key figure participants should focus on is the investment expense ratio charged by mutual funds for assets you hold in the plan. You need to know how much you’re paying in order to ask the next question: Is a certain money manager worth a 2% annual draw on your fund earnings or would you be better served with a low-cost index fund?
Unfortunately, the Department of Labor does not require expense ratios to be broken out in a simple, line-by-line way. If they did, plan participants could review the 401(k) fee disclosure and follow the money, without needing a PhD in economics or math. More importantly, plan participants could make apples to apples comparisons as they decide how and where to invest their retirement savings.
At Employee Fiduciary, we have long championed more fee transparency for both plan sponsors and participants. Like many others in the 401(k) industry, we had hoped the fee disclosure rules would help investors understand and take even more ownership over their retirement planning. But so far, the results have been totally negligible. We spend a fair amount of time educating our prospects and clients about our fees because we fully disclose our pricing (unlike other providers who may have their fees hidden in the fund’s expense ratio.)
So now it’s your turn: how is life after the 401(k) fee disclosure rule different for you? Or is it just business as usual? Tell me about it in the comment box below. I’ll do my best to get back to you in a timely manner!