Two-thirds of Americans with defined contribution plans or IRAs spend less than five minutes examining their retirement plan disclosures, according to a new survey.
LIMRA, Windsor, Conn., published this finding in a summary of results from a poll of Americans.
One in five of the survey participants say they rarely or never read the disclosure paperwork at all. The study also finds that younger plan participants (ages 18-35) are more likely to report reading their disclosures and more likely to reach out to their employer for information about their retirement account than older participants.
“With the implementation of the Department of Labor’s new fee disclosure rule, LIMRA wanted to gauge participant sentiment throughout the process,” says Alison Salka, corporate vice president, LIMRA Retirement Research. “Not surprisingly, almost 9 out of 10 participants either did not know the fees they paid or did not think they paid any fees for their employer-sponsored retirement plans.
“As participants are provided more detailed information about their retirement plans’ structure and fees, we are interested to see how they respond,” Salka adds. This survey is part of a series to track consumer knowledge and understanding of the information and the subsequent actions (if any) they take.”
Only 12% of plan participants say they can estimate the amount of fees and expenses they pay on their retirement plan account. Three-quarters of these participants say they believe the fees and expenses are reasonable. Additionally, more than half (56%) of those who estimate the fees and expenses think their fees are more than 2%, which is more than double the all-in median fee for a defined contribution plan participant (based on plans included in a 2011 Investment Company Institute study).
When asked what action they would take if they found out their fees and expenses were higher than average, one-quarter of the participants say they would move their assets into funds with lower fees. One-fifth say they would talk to their employer about trying to lower the fees, but nearly half say they would take no action or don’t know what they would do.
While men are slightly more likely than women to say they would take no action than women (19% vs. 13%), women are more likely to not to know how they would react (36% vs. 26%).
“This study underscores consumers’ lack of understanding about how their retirement plans are administered,” notes Salka. “This offers an opportunity for plan sponsors and providers to educate participants on the value and benefits of the plan.”