401(k) disclosure plan completed

Jul 22, 2008 @ 3:00 pm

By Sara Hansard

The Department of Labor today issued its final regulatory proposal governing 401(k) fee disclosures, a move that would affect 65 million plan participants.

Under the proposal — the last of three made in the past two years to improve 401(k) disclosures — a participant’s investments would be displayed on a chart showing total fees and expenses as well as benchmarks for how much typical investments cost.

“What people want are simple, concise disclosures,” so they can make judgments about which investments to choose without having to wade through voluminous prospectuses, Bradford Campbell, assistant secretary for the Labor Department’s Employee Benefits Security Administration, said in a telephone press conference.

The information would be required for all types of investments used in 401(k) plans, whether they are mutual funds, bank or insurance products.

The information would be sent to plan participants as part of their quarterly plan statements.

The Labor Department estimates that this would cost plan and service providers $800 million over the next 10 years, but that plan participants would save a total of $6.9 billion during that same period of time.

Two-thirds of the cost savings for plan participants would come from time savings that would be realized from not having to search for the information.

A third of the cost savings would come from price competition that would likely arise from participants receiving better disclosure, the Labor Department said.

The proposals will likely be finalized this fall, Mr. Campbell said.

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