401(k) plan execs ready for new regulations, survey finds

Most 401(k) plan executives say they are ready to implement new Labor Department regulations on fee disclosure, according to a survey by Dimensional Fund Advisors.

Eighty-two percent of plan executives said they could implement the rules immediately, said Tim Kohn, vice president and head of defined contribution services at Dimensional. The telephone survey was conducted in early February; the results were published Monday.

Of the executives who said they weren’t ready to act immediately, 15% said they would be ready by the deadline of July 1 for rules covering providers and sponsors and the deadline of Aug. 30 for the rules affecting sponsors and participants. Only 3% said they would need more than six months to prepare, Mr. Kohn said.

Mr. Kohn said 42% of the executives surveyed said they are looking to lower investment management fees to participants in the next 12 months. He said their comments reflected a combination of trying to help cut costs for participants, responding to what peers are doing and anticipating the regulations. Most of the fee-cutting strategies involved switching to institutional shares from retail shares, he said.

Mr. Kohn also noted that an “alarming” 23% of plan executives still believe their funds are free or the plans “pay zero” for investment management services. “The regulations will really shine a light on this,” he said. “It’s going to wake up some plan sponsors.”

The survey of 250 plan executives, primarily finance and benefits executives, was conducted by Boston Research Group. Among the plans surveyed, 23% had 500 or more employees and 7% had DC plan assets of $50 million or more.

— Contact Robert Steyer at rsteyer@pionline.com | @Steyer_PI