Scott, Murray: New GAO Report on 401(k) Fees is a Wake-Up Call
WASHINGTON, DC – A new report released today by the Government Accountability Office (GAO) revealed that almost 40 percent of 401(k) plan participants do not fully understand the fees they are paying on their retirement accounts, with many unaware they are even paying fees. It also found that consumers have difficulty using the information that the Department of Labor (DOL) requires 401(k) plans to provide about their fees.
According to the report, 45 percent of participants are not able to use the information given in disclosures to determine the cost of their investment fee. And more than four in 10 plan participants incorrectly believe that they do not pay any 401(k) plan fees.
The DOL requires 401(k) plans to provide the nearly 85 million plan participants with a comprehensive disclosure of the fees they pay. Chairman Robert C. “Bobby” Scott (D-VA), House Education and Labor Committee, and Chair Patty Murray (D-WA), Senate Health, Education, Labor, and Pensions (HELP) Committee requested that the GAO examine how well participants can understand and use the fee disclosures.
“The GAO’s findings are a wake-up call for the Department of Labor and for consumers who have 401(k) plans,” said Chairman Scott. “This report is clear evidence that the Department of Labor should require plan providers to make fee disclosures easier to understand and ensure that participants are fully informed about how these fees impact their savings. Americans are already struggling to stretch their paychecks and save for retirement. Making fee disclosures more accessible is a common sense change that will help more people retire with dignity.”
The report’s findings build on previous GAO reporting that has shown even seemingly small fees can significantly reduce participants’ retirement savings over time.
“People making decisions that will affect their financial security for years to come need to have clear, complete, information. This report is a clear warning this simply isn’t happening with respect to fees for 401(k) plans, which millions of people are relying on for their financial futures,” said Chair Murray. “I look forward to working with my colleagues and the Biden Administration to improve transparency, increase retirement security, and help people across the county make the best financial decisions for their families.”
The GAO makes several recommendations for how DOL can help 401(k) plan participants better understand and use fee information by adding information to disclosure requirements. Specifically, GAO recommends that the DOL:
- Require consistent terms and measure for investment fees in fee disclosures;
- Require participants individualized quarterly statements to show the actual cost of the investment fees;
- Provide educational information about the cumulative effect of fees;
- Require disclosures to include fee benchmarks which would help participants better gauge if their investment costs are competitive; and
- Require disclosures to include investment options’ ticker information, which would help participants more easily research and compare their investments.