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

No 27573, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G11 G18 G23 G28 G41 G51 H31 H55 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-age
Note: AG AP CF LE PE
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Citations: View citations in EconPapers (1)

Published as Kronlund, Mathias & Pool, Veronika K. & Sialm, Clemens & Stefanescu, Irina, 2021. "Out of sight no more? The effect of fee disclosures on 401(k) investment allocations," Journal of Financial Economics, Elsevier, vol. 141(2), pages 644-668.

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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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