Some workers with 401(k) plan accounts might be able to look forward to reductions in their plan fees thanks to new federal disclosure rules. In addition to increased fee visibility, the new disclosure rules are expected to allow companies to provide their workers with a vast selection of investment options.
401(k) Plan Disclosure Rules to Clarify Costs
Recently, the U.S. Labor Department announced that it would force 401(k) plan administrators and investment companies to disclose the cost of retirement plans due to challenges participants currently have with determining how much they are paying in fees.
The new rules will require that mutual fund firms and other administrators share details about fees they are charging to run plans with employers, while employers will be required to disclose costs to the workers investing in the plans.
The Labor Department originally planned to roll out the new rules by January 31, though this might change. The deadline for the disclosures to employers is planned for April 1 with an additional 60 days for employers to provide detailed information to participants about fees, expenses and investment performance.
Investment Options to Expand
Industry experts predict this disclosure adjustment will impact workers positively because the new fee visibility will give companies an opportunity to shop for more competitive investment options that could provide workers with lower costs.
Experts said that a percentage change as small as 0.5 percent a year in assets could save a worker as much as 10 percent by the time they retire. If they experience the reduction over 30 years, they could save nearly $100,000.
401(k) plans have grown in prominence since the early 1980s when an Internal Revenue Service regulation allowed workers to contribute money on a tax-deferred basis. Now, with greater fee visibility, improved investments options and lower fees, experts expect more workers to be willing to contribute money to their retirement accounts.