New fee disclosure regulations in the United States have had a negligible effect on members of employee-sponsored retirement plans, according to a study.
Conducted by BMO Retirement Services, the survey polled 416 sponsors of U.S. plans. Eighty percent of them say the new rules mandating full disclosure of retirement plan fees and expenses have had little or no impact on their plan participants’ behaviour or perception of their retirement savings benefit.
The fee disclosure requirement was introduced by the U.S. Department of Labor early last year. Its goal is to educate American workers and help them contribute more prudently to their DC plans.
Only 1% of employers participating in the survey say they have seen positive or negative changes in the behaviour of plan members as a result of the recent regulations. The same number of respondents report “an increase in ill will toward either themselves or the plan’s recordkeeper.”
Increased disclosure has not made plan members more baffled either, according to most of the plan sponsors polled. Only 15% of employers see greater disclosure as perplexing to their participants—although soon after the new regulation took effect last year, nearly half of employers feared that it would cause additional confusion.
The survey also reveals that when considering solutions for their DC plans, three-quarters of employers want measures that their plan participants can easily understand. More than one-quarter want solutions that are not too complex for them to manage.
This includes user-friendly target-date funds and risk-based asset allocation funds, says Matt Smith, managing director at BMO Retirement Services.
“Both are simple solutions to providing fully diversified portfolios based on the participant’s retirement date or their risk tolerance,” Smith explains. “After all, simplicity is the ultimate sophistication.”
Additionally, the BMO study shows that more than one-third of employers believe that the baby boomers enrolled in their companies’ retirement plans will work past the age of 65. Forty-one percent of employers expect that this will affect their companies favourably. Only 4% see it as a negative phenomenon.
“People are living longer than they did decades ago, so it is not surprising that such a large number of our plan sponsors believe that their employees will be working well into their 60s,” Smith says. “This bodes well for employers that wish to hold on to employees with valuable knowledge and experience.”
This also bodes well for employees who want to stay on the job longer, according to Smith. “Working keeps people vibrant and young, so if you’re happy and healthy and enjoy your job, why retire?” he says.
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