Fee disclosures to plan sponsors and plan participants, which are required under Labor Department regulations, have resulted in benefits for both sponsors and participants, according to a recent Government Accountability Office report.
The GAO report, which the agency made public Oct. 28, focused on regulations the DOL issued in 2010 and 2012. Those regulations require service providers to disclose the fees they receive for plan-related services to fiduciaries, which include plan sponsors, as well as mandate the disclosure of “plan and investment fee information to participants and beneficiaries,” according to the report, which is dated Sept. 27.
The report was requested by three members of Congress: Senate Appropriations Committee Chair Patty Murray, D-Wash.; Senate Health, Education, Labor and Pensions Committee Chair Bernie Sanders, I-Vt.; and Rep. Bobby Scott, D-Va., who serves as the ranking member of the House Education and the Workforce Committee.
From October 2023 to September 2024, the GAO reviewed relevant literature and agency documents for the report as well as interviewed a group of “13 stakeholders that represented service providers or plan sponsors, research organizations, and consultants who are knowledgeable about the aspects of 401(k) investments, fees, or regulations,” the agency said.
Through these interviews, the GAO heard that “fee disclosures provided to plan sponsors increased their awareness and ability to manage their plans,” with some stakeholders contending that smaller plan sponsors benefited more than larger ones, according to the report.
Furthermore, stakeholders said fee disclosures to participants can increase their “knowledge of and involvement in their 401(k) plans,” though they also raised concerns that participants may not understand the disclosures provided to them.
A GAO study from July 2021 found that 40% of participants surveyed didn’t fully understand fee information, and 41% didn’t know they paid fees.
“To address this issue, plan sponsors and service providers can modify their fee disclosures or provide education to increase participant financial literacy, according to these stakeholder groups,” the GAO said in an Oct. 28 news release.
The GAO noted that the Labor Department provides a series of resources to assist plan sponsors and service providers with fee disclosure compliance, including written resources on its website, a phone line and email account to answer questions, and training provided both online and in person for plan sponsors.
“DOL also monitors the implementation of the regulations through investigations, a web portal for plan sponsors, and by reviewing the regulations through required reporting,” the report said.
In addition, the Labor Department is “working on two reports to Congress related to fee disclosures that are both due in December 2025, as required by the SECURE 2.0 Act of 2022,” according to the report.
Though service providers have generally charged lower fees in recent years, most stakeholders said the DOL regulations did not play a major role in that change, instead pointing to other factors such as threats of litigation, technology and innovation, and increased service provider competition, the GAO said.