Fee disclosure for retirement plans has been in place for a few years now. The idea is that with better fee disclosures from the service providers, people that put money in retirement plans will be better informed about the costs of their plan.
Well, I suppose that would be the goal of fee disclosure, wouldn’t you think? Better disclosures would mean better informed consumers. Do you believe that is the goal? Really? I don’t! The DOL didn’t mandate fee disclosures so people would become better informed and then just get on with their lives.
The DOL’s real goal was that as participants became aware of plan fees they might scream something like: “What the #$@%*!” Then they would ask their employer why they are paying all these fees and demand that they do something about it. Employers would in turn put pressure on service providers to clean up their convoluted payment streams and reduce costs. Plan costs would come down and more money would stay in the employees’ accounts, where it belongs, so they have more money for retirement. This, I believe, is the real goal of fee disclosure.
Of course, I don’t know nor have I ever talked with anyone from the DOL. And I am definitely not a mind reader! But the DOL has most certainly known for years about the absurdity of many of the fees in retirement plans. They had to expect that mandated fee disclosures would promote big reductions in fees for many plans.
Fees might be coming down as a result of fee disclosure. It certainly has generated some buzz in the industry. But from what I have seen as I talk with plan sponsors of smaller firms, it has had little impact.