I can see clearly now: The impact of disclosure requirements on 401(k) fees

Abstract

In 2012, the US Department of Labor imposed new disclosure requirements for indirect fees that 401(k) retirement plan service providers earn through revenue sharing agreements with mutual funds. This paper examines the impact of these fee disclosure requirements on the level and structure of fees paid by retirement plans, as well as service providers’ ability to price discriminate between plan sponsors of different sophistication. We document that the new disclosure requirements are associated with a substitution of direct fees for indirect fees and a reduction in total fees paid by smaller plans, and that mutual fund providers responded by introducing retirement fund share classes with lower 12b-1 fees.