“It’s been a non-event,” Charlie Nelson, president of Great-West Retirement Services, told PLANADVISER, referring to the scarce number of calls his company has received from participants about the fees listed on their 401(k) statements as a result of 404(a)(5) disclosure.
Jason Frain, vice president of 401(k) product management and development at Guardian Life Insurance Co., said that after the November 15 statements were sent to participants—the first statements to reflect the new regulations—his company saw very few participants take action or question their statements. “Honestly, we’ve seen very few participant calls or emails coming into our service area,” he said.
Aside from participant apathy, Frain attributes the lack of questions to the education that took place before participants received their statements, which he said may have helped curb confusion.
Although Nelson said he thinks the Department of Labor’s (DOL’s) “heart was in the right place” in creating the regulation, there is little interest from participants.
Clarence Kehoe, executive partner at Anchin, Block & Anchin LLP Accountants and Advisors, agrees that the idea behind 404(a)(5) was great. “The intent of the new rules I think are wonderful,” he said, but unfortunately they create cost-benefit headaches for plan sponsors. In general, Kehoe thinks the industry’s focus is a bit misguided, valuing lower cost over higher quality.
Frain said 404(a)(5) showed that “no real amount of disclosure is going to change participants’ behavior.” Rather, he noted, participants will change their behavior if actionable steps are easy or taken for them; e.g., automatic enrollment, automatic escalation and managed account solutions.
But all was not lost with 404(a)(5). Frain thinks plan sponsors ultimately benefited from participant disclosure regulation by becoming more aware of fees and services. The regulation also helps plan sponsors with due diligence as they enter into a request for proposal (RFP) or benchmarking process.
In the end, participants do benefit if plan sponsors can make changes that reduce their fees, but it is more of an indirect benefit for participants, Frain said.