The Labor Department recently released its anticipated ruling on 401(k) plan fee disclosure. The requirements could grease the wheels for exchange traded funds (ETFs) to be a regular part of the retirement plans.
According to the Department of Labor, the final regulation aims to provide participants and beneficiaries in these plans the information needed to make decisions about retirement savings investments. Marianna Lehman for Ignites reports that the rule says uniform disclosure has to be given to workers about what they actually pay for investment options in their retirement plans.
The new rule will apply to plans starting on Nov. 1, 2011. Under the final rule’s requirements, plan administrators must disclose general information about the plan and administrative expenses such as legal fees, accounting fees and record keeping fees. Fees and expenses must be expressed as a percentage of assets and as a dollar amount on $1,000 invested. [5 Things to Consider With ETFs And Retirement.]
The new rule may eventually lead to lower fees and expenses. The more this information becomes transparent, the more likely that a fee “war” will take place among providers who are targeting market share. [ETFs In a 401(k): What It’s All About.]
This transparency could also be to the benefit of ETFs, which have long been trying to fully crack the 401(k) market. Once fees are required to be disclosed more fully, plan providers might find themselves finally believing that ETFs are the best option for such plans.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.