The prevailing wisdom about the DOL’s fee disclosure rules is that they were ineffective and failed to move the needle on participant behavior.
Numerous studies and polls have confirmed this perception. According to a Plan Sponsor Council of America survey, for example, nearly all (95.6%) plan sponsors reported no change in participant behavior as a result of the fee information. And a recent LIMRA study suggested that two-thirds of Americans with DC plans or IRAs spend less than five minutes reading the disclosures they've been receiving — and one in five say they completely ignore the paperwork.
But John Schadl, principal and head of Vanguard Strategic Retirement Consulting, identifies one benefit of the disclosure rules: uniformity.
One of the benefits of uniformity in fee disclosure, Schadl says, is that participants in different plans now receive disclosures that look relatively similar. For example, the new disclosures require that service providers describe the investments in a comparative way. This means that sponsors must show plan investments in a comparative chart with the fund name, where fund information can be found online, the fund style, performance returns over 1, 5, and 10 years, what the benchmark is for that fund so participants can compare it, and what the fees are.
"When it comes to disclosing information, I think there had been some variability among service providers," says Schadl. "That's why the uniformity requirement in these regulations is so important. When you click on Vanguard's website you should be able to get the same information you're going to get at any other fund provider's website. And the charts in one provider's disclosure should look roughly the same as any other provider's."
For example, Vanguard — to whom low fees are very important — can't overemphasize fees while another provider charging much higher fees doesn't show fees at all. Also, providers can't pick and choose which performance returns are shown.
