GAO Makes Recommendations to Help Participants Better Understand Fee Disclosures

The agency found 45% of participants are not able to use the information they are given and 41% erroneously believe they don’t pay any fees.

Since 2012, the Department of Labor (DOL) has required defined contribution (DC) retirement plans to provide participants with information on plan and investment fees.

During a 2010 news conference, then-Assistant Secretary of Labor of the DOL’s Employee Benefits Security Administration (EBSA) Phyllis Borzi said fee disclosure rules are designed to “make sure everyone knows what they are paying for and how this affects plan balances.” However, a recent Government Accountability Office (GAO) study found this has not always been the case.

The agency assessed participants’ understanding of disclosures by giving them samples of several large plans’ 401(k) fee disclosures and other information about fees and asking them general knowledge questions about fees. The GAO found that 45% of participants are not able to use the information given in disclosures to determine the cost of their investment fee, and 41% of participants incorrectly believe that they do not pay any 401(k) plan fees.

Furthermore, the GAO said its review of some other countries and the European Union (EU) found they have implemented practices to help retirement plan participants understand and use fee information from plan disclosures. For example, some stakeholders in other countries layer data, a technique in which information is presented hierarchically and that provides participants key plan information first. In another example, the government in Italy provides a supplemental online tool so participants can compare and calculate fees across plans and investment options. This tool also includes a fee benchmark—which is generally an average fee among comparable funds—that helps participants judge the value of an individual investment option.

The GAO determined that the DOL could take additional steps to help DC plan participants improve their understanding and use of fee information, and it made a number of recommendations for doing so.

The agency notes that the DOL regulations require disclosures to present fee information in a format that helps participants compare investment options; however, disclosures are not required to include certain information, such as fee benchmarks and ticker information (i.e., unique identifying symbols used for many popular types of investments).

“Fee benchmarks can help participants to assess an investment option’s value, not only relative to other in-plan options but to options outside the plan,” the GAO says in its report. “Ticker information can help participants identify many plan investments online to evaluate and compare them to options outside the plan. By requiring such information in disclosures, the DOL could help participants better understand and compare their plan fees when making investment choices that affect their retirement security.”

To download the full GAO report and see the five recommendations the agency made to the DOL’s EBSA, visit