Spurred by the U.S. Labor Department's effort to force plan administrators and investment companies to disclose the cost of 401(k) retirement plans, companies are looking to reduce fees and offer new investing choices, Anne Tergesen reports on Markets Hub. Photo: AP.
The rules governing America's most popular retirement vehicle are about to change, and that could mean huge savings for millions of workers building nest eggs for the future.
Spurred by the U.S. Labor Department's effort to force plan administrators and investment companies to disclose the cost of 401(k) retirement plans, companies are looking to reduce fees and offer new investing choices.
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Under current rules, it is difficult—if not impossible—for many 401(k) participants to determine how much they are paying in fees. The fees, which vary by type and size, aren't typically disclosed in annual statements to investors. Because of the extended time frame involved in retirement accounts, a small percentage change in an annual fee can make a big difference in the investment performance.
Analysts and companies in the industry say the increased disclosure will allow companies to negotiate better deals and employees to request more cost-efficient plans. Already, the prospect "is putting downward pressure on fees," said Lori Lucas, leader of consulting firm Callan Associates Inc.'s defined-contribution practice.
The Labor Department had hoped to roll out the rules by Jan. 31. A department spokesman said it would likely happen within a few weeks.
Fidelity Investments, ING U.S., Manulife Financial Corp.'s John Hancock unit and BlackRock Inc. in the past few years have rolled out low-cost index mutual funds alongside their higher-fee actively managed funds.
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