Out of Sight No More? The Effect of Fee Disclosures on 401(k) Investment Allocations

Mathias Kronlund, Veronika K. Pool (), Clemens Sialm and Irina Stefanescu
Additional contact information
Veronika K. Pool: https://business.vanderbilt.edu/bio/veronika-pool/
Irina Stefanescu: https://www.federalreserve.gov/econres/irina-stefanescu.htm

No 2020-078, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We examine the effects of a 2012 regulatory reform that mandated fee and performance disclosures for the investment options in 401(k) plans. We show that participants became significantly more attentive to expense ratios and short-term performance after the reform. The disclosure effects are stronger among plans with large average contributions per participant and weaker for plans with many investment options. Additionally, these results are not driven by secular changes in investor behavior or sponsor-initiated changes to the investment menus. Our findings suggest that providing salient fee and performance information can mitigate participants' inertia in retirement plans.

Keywords: 401(k) plans; Disclosure; Expense ratio; Financial regulation; Mutual funds; Pensions; Performance (search for similar items in EconPapers)
JEL-codes: G11 G23 G28 G40 H55 (search for similar items in EconPapers)
Pages: 66
Date: 2020-09-03
New Economics Papers: this item is included in nep-age
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https://www.federalreserve.gov/econres/feds/files/2020078pap.pdf (application/pdf)

Related works:
Journal Article: Out of sight no more? The effect of fee disclosures on 401(k) investment allocations (2021)
Working Paper: Out of Sight No More? The Effect of Fee Disclosures on 401(k) Investment Allocations (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2020-78

DOI: 10.17016/FEDS.2020.078

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