August 15, 2012
--- More than half of participants surveyed do not
understand retirement plan fees, indicating a need for education before the fee
disclosure regulation goes into effect this month. ---
Employee Retirement Income Security Act (ERISA) 404(a)(5) regulation requires
plan sponsors to provide fee information to participants by August 30.
According to the bi-annual Defined Contribution Investor Survey from State
Street Global Advisors, 61.8% of participants said they do not understand fees.
participants receive their first statement reflecting the new fee disclosure
regulation, they may have a strong reaction to the fees listed, even though
these are fees they have always paid (see “Participant
Education Needed Before 404(a)(5) Deadline”). This reaction could be
based on a lack of understanding, Jake Winegrad, adviser at Moneta Group, told PLANADVISER.
don’t like paying for something that they don’t understand,” he said.
survey also found that while 40.1% want to understand fees, only 18.7% said
they would use that understanding to inform their investment choices.
said that although he fully supports the regulation, he is concerned that the
participants who carefully read their statements might begin making investment
choices based solely on fee amounts. “There are many other factors that need to
go into your investment election decisions,” he cautioned.