Survey Suggests No Expected Uproar About Fee Disclosures

August 28, 2012 ( - One in five defined contribution (DC) participants surveyed by LIMRA said they rarely or never read retirement plan disclosures.

The rest claimed to read disclosures at least some of the time, but the majority reported they are only skimming them and/or trying to see if they reveal something “important.”     

The most common reasons plan participants do not read disclosures are that they are too long, and that they are too technical/complicated and hard to understand. Forty percent said that they did not read disclosures because they would not change anything, anyway.    

Reaction to fee disclosures could be muted in part because participants are not sure what to do with the information.One in three plan participants reported they did not know what they would do when asked about their reaction to discovering they pay higher than average fees.Nearly one-quarter (24%) said they would move their current assets into funds with lower fees and one in five (21%) said they would speak to their employer about the fees they pay.    

Younger plan participants (ages 18 to 35) are more likely to report reading disclosures; this group is also more likely to reach out to their employer for information about their retirement account than older participants.

Half of DC plan participants do not know how much they pay in annual fees and expenses, the survey found. Women and those with household assets under $100,000 are more likely to be unaware of how much they pay in fees and expenses each year.    

Many will be surprised with the information in the new disclosures—almost four in 10 (38%) said they did not pay any fees or expenses. Those who do not believe they pay any fees or expenses tend to have less in household assets and are less likely to have graduated college.   

Of the 12% who said they were able to estimate their fees, the most common estimate was less than 1% of the account balance (44%).Nearly three-quarters (74%) of those who estimated their plan fees believed that they were reasonable.     

Most consumers (62%) do not know how the fees charged within DC plans compare with those charged in individual retirement accounts (IRAs). Even among participants that are very or somewhat knowledgeable about investments and financial products, four in 10 do not know how DC and IRA fees compare.  

In May 2012, LIMRA surveyed U.S. adults ages 18 to 84 who are involved in household financial decisions and currently work for pay, are retired or recently unemployed (i.e., have worked for pay in the past 12 months). Of 5,296 consumers, 974 defined contribution participants were randomly selected to answer questions about DC plan fee disclosure.