Products June 5, 2019

Fidelity TDF Fees Rival Vanguard’s After Reductions

With its fee reduction, 21 of the 22 Fidelity Freedom Index Funds will have total net expenses lower than comparable Vanguard index target-date funds, Fidelity says.

Reported by

Fidelity investments is announcing a 14% price reduction on the entry-level share classes of the Fidelity Freedom Index Funds and the Fidelity Institutional Asset Management Index Target Date Commingled Pools. The fees on all of the investor share classes on these funds are being reduced from 14 basis points to 12 basis points.

Fidelity estimates that the new fees, which became effective June 1, will save investors in the Fidelity Freedom Index Funds $3.2 million a year.

With this action, 21 of the 22 Fidelity Freedom Index Funds will have total net expenses lower than comparable Vanguard index target-date funds, Fidelity says. The investor share class of the Fidelity Freedom Index Fund has the same expenses as its Vanguard counterpart: 12 basis points.

Eric Kaplan, head of target-date product at Fidelity, tells PLANADVISER that Fidelity has continued to reduce the fees on these funds since their launch and that growth in assets under management has made it possible to do so. Last year, for example, Fidelity reduced the institutional premium share class fees on these funds from 10 basis points to 8 and the investor share class fees from 15 to 14.

As to why Fidelity decided to make these reductions now, Kaplan says, “Fidelity is continuously looking at the marketplace to ensure our fees are competitive. We are committed to choice and value across our full suite of target date strategies. From a bigger picture standpoint, we have been looking at our fees on all of our strategies, particularly on the index side.”

According to the the most recent 401k Averages book, investment fees continue to decline. All scenarios (expect one) saw a year-over-year decrease in total investment costs of between 0.01% and 0.03%.

Kaplan notes that retirement plans with less than $100 million in assets use the investor share class, with the institutional premium share class available to plans with assets greater than that amount.

As for the objectives of these funds, Finola McGuire Foley, one of the three portfolio managers of these funds, says, “The goal of the target-date strategies is the same for all of our active, index and blend offerings. The goal is to help participants maintain their standard of living throughout their retirement years, so the funds are designed to balance the need for total return during participants’ working years and capital preservation during their retirement years.”

Compliance June 4, 2019

Groups Ask DOL to Make 401(k) Electronic Delivery the Default

ICI, SPARK and the ACLI are among the eight organizations making the request.

Reported by

Eight organizations associated with defined contribution (DC) plans, including the Investment Company Institute (ICI) and the SPARK Institute, have submitted a letter to the Employee Benefits Security Administration of the Department of Labor (DOL) asking it to propose regulations that would permit plan sponsors to make electronic delivery the default method of delivery for retirement plan disclosures and notices. If employees did not want electronic delivery, they would have the ability to request paper copies.

The groups note that on August 31, 2018, President Trump signed an Executive Order on Strengthening Retirement Security in America, directing the DOL to review within a year how to make retirement plan disclosures more understandable and usable. One of the options the order noted was electronic delivery, which would also reduce the cost of making these disclosures.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

“We would urge the Department to further prioritize electronic delivery as a part of any rulemaking to reduce costs and burdens, as outlined by the Executive Order,” the letter states. “If finalized, those regulations would immediately make retirement plan disclosures and notices more efficient and useful for retirement savers. Electronic delivery empowers retirement plan participants by providing them constant and real-time access to information about their retirement benefits and other online tools that can assist with retirement planning. It also could make disclosures and notices much less costly.”

The groups note that with electronic delivery, the notices could be linked to other information, such as financial wellness, and positive actions, such as increasing retirement plan contributions.

The co-signees of the letter are the American Bankers Association, American Council of Life Insurers, American Retirement Association, ERISA Industry Committee, Investment Company Institute, Securities Industry and Financial Markets Association, SPARK Institute and U.S. Chamber of Commerce.

The letter can be viewed here.

«