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

79 Pages Posted: 26 Dec 2018 Last revised: 15 Jul 2021

See all articles by Mathias Kronlund

Mathias Kronlund

Tulane University

Veronika Krepely Pool

Vanderbilt University - Finance

Clemens Sialm

University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER)

Irina Stefanescu

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: October 1, 2020

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) pension plans, Disclosure, Expense ratio, Financial regulation, Mutual funds, Pensions, Performance

JEL Classification: H55, G40, G28, G11, G23

Suggested Citation

Kronlund, Mathias and Pool, Veronika Krepely and Sialm, Clemens and Stefanescu, Irina, Out of Sight No More? The Effect of Fee Disclosures on 401(k) Investment Allocations (October 1, 2020). Journal of Financial Economics (JFE), 2021, Kelley School of Business Research Paper No. 19-6, Available at SSRN: https://ssrn.com/abstract=3288808 or http://dx.doi.org/10.2139/ssrn.3288808

Mathias Kronlund (Contact Author)

Tulane University ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Veronika Krepely Pool

Vanderbilt University - Finance ( email )

United States
615-343-0277 (Phone)

Clemens Sialm

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

HOME PAGE: http://faculty.mccombs.utexas.edu/Clemens.Sialm/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Irina Stefanescu

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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