SURVEY SAYS: What About the DoL's Fee Disclosure Proposal?

July 31, 2008 (PLANSPONSOR.com) - Last week, the Department of Labor published its much-anticipated proposed participant fee disclosure regulations.

This week, I asked readers for their perspective on the matter.  

If you haven’t gotten around to reading them yet, you’ve got quite a bit of company.   Nearly half of this week’s respondents ( 45.1% ) hadn’t gotten around to that (yet).   Some had tried, of course ( “Makes my head spin,” noted one).  

However, 22% said they were more trouble than they were worth, and nearly 5% said they go too far.   Roughly 11% said they were a start, and 12.1% were willing to call them a “good start”, though 4% said they “don’t go far enough.”  One reader noted, “Just another thing they won’t read. Too little time for the programming and IT work needed. But a good core concept.”

One reader noted, “Insurance companies can bury their administrative fees in the funds via unitization. For those of us in the open architecture world, we now have to show the fees deducted from their earnings on the statements. How does this make the playing field even between insurance products and mutual funds?”  Another noted simply, “I guess it is time for Big firms to find new and creative ways to create income.”

Another noted, ” Yet another worthless notice, which will be ignored. The cost estimates used by the DoL are laughable. They estimate 1/2 hour of legal time to review. I can’t get an attorney to pick up a phone without billing me for an hour.”

I also asked readers what they thought that participants would do with these new disclosures - and the response was relatively consistent, if not encouraging.   More than half ( 56% ) said "not a darn thing", while just over a quarter ( 25.3% ) said they would "misunderstand their plan costs and complain," while nearly 7% said they would "complain about their plan costs."  

There wasn't much on the positive side of the ledger; though roughly 8% thought participants would better understand that there are plan costs, 2% thought they would actually better understand those costs (one respondent acknowledged, "I know that's rather generous, but I hope that it will be true for me as a participant" ), and the remaining roughly 3% thought they would appreciate what they pay for those plan costs, even if they misunderstood them.   Not a single respondent thought the disclosures would help participants make better investment choices.

On reader noted, "A significant number of participants don't even open their statements now. Even bigger envelopes will cause less of them to be opened."   Another suggested that "They will go from the envelope to the trash, perhaps via a shredder," while another said the disclosures would be used to "Line the bird cage."

Some didn't think they would be noticed - but didn't necessarily see that as a bad thing.   As one reader noted, "Fortunately, most won't bother to look into plan costs (ours are very competitive, thank you!), which would most likely be a source of confusion and bad assumptions."

On the other hand, as one reader observed, "The key word here is "most". Most participants will do nothing with the disclosures. However, some participants want to know more about how the fee structures. And in my humble opinion, ALL participants should know and understand the fee structures."   Another said, "Maybe it will spur a few to ask questions. More likely will be a switch to whatever is the low cost fund, regardless if that fund is a good choice for that participant's circumstance.

And one provider observed, "I think the disclosures offer the opportunity for participants to make more informed choices. My concern for plan sponsors and advisors is that they will need to broaden their efforts so participants can compare the cost of investing within their retirement plan to the cost of the same investments outside of the plan.

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But this week's Editor's Choice goes to the reader who said, "Haven't fully read them yet, but since in has been my experience that participants don't even look at their statements now, what gives the government the idea that all of a sudden they will start reading them just because we put more information on them."  

Thanks to everyone who participated in our survey!

Insurance companies can bury their administrative fees in the funds via unitization. For those of us in the open architecture world, we now have to show the fees deducted from their earnings on the statements. How does this make the playing field even between insurance products and mutual funds? In addition, we work with independent brokers. Who is going to prepare these comparison charts for the plans? As the TPA, we don't get paid to monitor the investments and I know that the brokers won't do the charts.
Just another thing they won't read. Too little time for the programming and IT work needed. But a good core concept.
Makes my head spin
I read the proposed reg but not the commentary (yet). We currently disclose all of the required info in some form. We shall see how much trouble it is to get it into acceptable format/delivery method/frequency.
I guess it is time for Big firms to find new and creative ways to create income.
Disclosure is always good, but I doubt that most participants will know what to do with them.
Recommended delivery avenues (SPD) are impractical. No plan provides SPD on annual basis. Alternative Delivery method will be required and there's not enough time to get ready if these going into effect 1/1/09!
Haven't fully read them yet, but since in has been my experience that participants don't even look at their statements now, what gives Congress the idea that all of a sudden they will start reading them just because we put more information on them.
Yet another worthless notice, which will be ignored. The cost estimates used by the DoL are laughable. They estimate 1/2 hour of legal time to review. I can't get an attorney to pick up a phone without billing me for an hour.
What's missing from the regulations is a requirement for disclosure of revenue sharing and other money sloshing around behind the scenes. DOL's estimate that fees amount to 11.3 bps is way too low.
A significant number of participants don't even open their statements now. Even bigger envelopes will cause less of them to be opened.
I know that's rather generous, but I hope that it will be true for me as a participant.
I think the disclosures offer the opportunity for participants to make more informed choices. My concern for plan sponsors and advisors is that they will need to broaden their efforts so participants can compare the cost of investing within their retirement plan to the cost of the same investments outside of the plan. Otherwise, the participant is not fully informed and does not have the information needed to make an informed choice.
The key word here is "most". Most participants will do nothing with the disclosures. However, some participants want to know more about how the fee structures. And in my humble opinion, ALL participants should know and understand the fee structures.
They will go from the envelope to the trash, perhaps via a shredder.
Line the bird cage.
Maybe it will spur a few to ask questions. More likely will be a switch to whatever is the low cost fund, regardless if that fund is a good choice for that participant's circumstance.
Fortunately, most won't bother to look into plan costs (ours are very competitive, thank you!), which would most likely be a source of confusion and bad assumptions.

This week, I also asked readers what they thought about the talk of bringing back the federal 55 mph speed limit.   Nearly one-in-five ( 18% ) said it was a reasonable solution to spur conservation, while 19% said it won't make a difference, but it might get people's attention.

More than half ( 59.6% ) said that bringing back the 55 mph limit is a "stupid" idea - and just 4% said they really didn't have an opinion.  

The verbatims were, as usual, priceless.   Here are some favorites:

Do Congressman actually drive themselves places?

The posted speed limit very seldom has any relation to the actual speed of the vehicles!

It will do nothing for conservation, but it will help fill some of the state coffers (and probably take some cash out of mine) with added speeding ticket revenue.

Now they want to sock me with a higher bill and make me spend more time on the highway to think about it.......

. Who goes the speed limit now?

The first time this was enacted, my high school chemistry teacher was all for it. He owned a Jaguar XKE V12 coupe, and his reasoning was he could now go three times the speed limit instead of only twice the speed limit.

Seriously...if you can still afford to drive you should be able to do so at whatever speed pleases you.

But this week's Bonus Editor's Choice goes to the reader who said, "....the dropping price of gasoline..." That may be technically accurate but going from totally obscene to moderatly obscene doesn't really help out much."

Thanks to everyone who participated in our Bonus Survey!

It didn't work the first time, people just got creative about circumventing the law (remember the CB radio craze). I believe it also fostered an attitude of "it's ok to break the speed limit by 5 (or 10) MPH because it's set so low anyway."
Please let the market system take care of the problem. Keep government out of it!
Do Congressman actually drive themselves places?
Here's a better one: Perhaps consumers should take it upon themselves to consider gas mileage as a number one priority when shopping for a car and stop whining about the price of gas. Did we learn nothing from the 70s' oil crisis? We should have been demanding better gas mileage from car manufacturers all along. (And it just ain't gonna happen with a Hummer!) Maybe Congress could help by bringing back the tax break for hybrid car buyers.
And it just might lead to a reduction in highway traffic fatalities!
Seriously...if you can still afford to drive you should be able to do so at whatever speed pleases you.
I think it will be good for law enforcement/city revenue while we all learn to drive slower.
The only thing it will achieve is increase the coffers of the local law enforcement agencies.
It just doesn't matter. I know there have been studies showing 55 is more efficient. But, people speed now, and they will still speed if the limit is 55.
There has been a lot in the press about improving gas mileage by driving slower but most people don't seem to care and drive just as fast including faster than the current speed limit. I don't think a lower speed limit will slow most people down.
The posted speed limit very seldom has any relation to the actual speed of the vehicles!
It will do nothing for conservation, but it will help fill some of the state coffers (and probably take some cash out of mine) with added speeding ticket revenue.
There was a column in the NJ Star Ledger about how NJ State Troopers should enforce 55 mph on the NJTP. I think if that happened, no one would ever get anywhere -- it would be one long traffic jam, end to end. THere has to be a balance between keeping vehicles moving as quickly as they can and energy conservation.
Unless I have heard wrong, I believe cars today get equal gas mileage at 70 as they do at 55. Would Sammy Hagar come back from the dead if we bring this back? I sure hope not!
I'm more concerned with the safety of our roads than saving energy. Combine aggressive driving (do they think driving is a video games?) with cell phone usage is asking for trouble. Combining this with a 500% surcharge for minutes spent on a cell phone while driving would be more effective for the latter.
It might help if the police actually stepped-up enforcement of the speed limit...
Here in Texas, the speed limit was never really observed on the many miles of rural highways - except where everyone knew the local law had a speed trap. People's time was always worth more than the bit of extra fuel that got burned.
A better solution is to get traffic through town more quickley. I spend too much time waiting at traffic lights. A better flow would waste less gas. BUT wait, Congress has no motive to not waste gas. We will get stuck again!
Americans know that driving faster burns more gas and we also know how much we are paying for a gallon. Those wanting to drive fast are only hurting themselves.
We have great interstates and highways, which in my opinion are a waste at 55 mph. Compliance with the 55 mph laws was never good, which indicates this is not a law for the people and by the people - it's just opression by the government.
I know the evidence says 55 mph delivers better gas mileage, but it is JUST TOO SLOW for interstate driving - why not give tax incentives on hybrid vehicles instead.....
I dont' know about the conservation part but it might get drivers to slow down to 75 MPH or so which might lower the number of car wrecks.
While it may assist in helping people use less gas, since most are already driving 10 - 15 mph over the posted speed limit, I don't really see this making a huge dent.
They can bring it back, but it would require 100% enforcement to make it stick, and I can't see that happening.
I actually tried to go 55 mph on the highway this morning and it felt like I was crawling compared to most cars going above the 65 mph limit.
No matter what the posted speed limit is here in Denver, the traffic speed depends on the amount of traffic. 7am the speed is 15-20 mph, 2am the speed is 80 mph.
Slowing down the freeways will not only reduce accidents but save a ton on gas. I've heard it but never really believe it until I slowed down just 5 mph (ok, I'm a little of a lead foot so MUCH closer to the actual speed limit now). There will be a buzz if it is passed but eventually, like everything else, people will settle in to a new routine. I'm just hoping this means my employer won't expect me to be in as early or stay as late..you know the drive will take so much longer now...
I thought I saw a recent report where this didn't work in the '70s. If it didn't work then, why would we think it will work now. My experience when driving the 95 corridor from Connecticut to Virginia is that so few people obey the 65 mile speed limit, how would we expect them to obey a 55 mph speed limit. I regularly experience people driving well over 85 miles an hour south of DC on 95, of course that's when we are moving at all. Silly, just silly. There isn't enough law enforcement in the world to handle this problem. Governors on the cars maybe but I doubt even that would work.
It probably won't do much for conservation but it will save some lives.
Does anyone go the speed limit? It's just a ticket "annuity" for the police to write larger tickets out.
Did it work last time?
Now they want to sock me with a higher bill and make me spend more time on the highway to think about it.......
Although driving at 55 will consume less gas than driving 75, most people average about 80 MPH on the highway (at least that is what it seems as they zoom past), so a change in number on a posted sign won't change that much. I'm surprised they haven't raised it to 75 already...
The issue with the 55MPH speed limit is that when it was first enacted there was a true shortage of fuel. In our present situation, there's plenty of gas to go around, so let the market encourage people to conserve (as it is already).
The first time this was enacted, my high school chemistry teacher was all for it. He owned a Jaguar XKE V12 coupe, and his reasoning was he could now go three times the speed limit instead of only twice the speed limit.
We just had a stretch of highway change from 55 to 70 because it made a bottleneck. Everyone was much happier. Can't imagine changing all highways back. Michigan
It's a time versus money trade-off. I notice people driving slower, and do so myself when I am not in a rush (60mph), but I prefer the option of going faster if I'm pressed for time. I'm more likely to be ticketed if the speed limit drops.
The key is reducing consumption--if we hope to have any significant impact, we need to put the greatest effort here rather than in finding new sources of supply or increasing production from existing sources. It is incumbent on all of us to find ways in our daily lives to reduce our personal consumption of energy. I also want to hear more from the presidential candidates on their proposals for reducing consumption.
People are basically lazy.
As in any other law that is difficult to enforce, it will be a money maker in NJ which has an average speed of 80 on the Turnpike.
It isnt that big of a change for those in the banking/trust world. We always disclose our fees. The reg may even the playing fieldand we may stop losing accounts to companies that claim their services are free!
Every law has unintended side effects. It's not practical to have a federal law about speed limits, because situations vary widely around the nation. For example, in one area, dropping the speed limit may cause more traffic and more pollution. Let local authorities decide what is best for their local roads. Let congress get back to whatever other useless and damaging things they are doing with our money.
"....the dropping price of gasoline..." That may be technically accurate but going from totally obscene to moderatly obscene doesn't really help out much.
In the 70s I remember (vaguely) the gas lines, gas rationing and the alternating days to get gas. I remember my parents saying we should be looking at alternative fuel sources. 30 some years later, we haven't started the rationing yet, but why are we still saying 'maybe we should be considering alternate fuel sources'?
Reducing the limit will benefit law enforcement speeding ticket collection, increase the number of accidents by increasing the difference in speeds between the fast and law abiding drivers, and IMHO cause the number of road rage incidents to increase.
You give people an inch and they take a mile. People think 65mph means they can drive 80mph. Maybe with bringing back 55mph people will go down to 70mph. That at least will make the highways a little safer, along with helping with conservation.
I rarely get discouraged by change. I love change normally but lately I find myself so overwhelmed, I don't even know where to begin. Too much, just too much.
Funny how everything in this world is better, faster & cheaper......except driving. Traffic is a nightmare, we cannot drive faster (55 MPH???) and at $4/gallon for gas, it certainly isn't cheaper.
A reasonable solution, but I hate it anyway.
Who goes the speed limit now?

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