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

65 Pages Posted: 26 Dec 2018 Last revised: 15 Jul 2020

See all articles by Mathias Kronlund

Mathias Kronlund

Tulane University

Veronika Krepely Pool

Vanderbilt University - Owen Graduate School of Management; Indiana University - Kelley School of Business - Department of Finance

Clemens Sialm

University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER); AQR Capital Management, LLC

Irina Stefanescu

Federal Reserve Board, Washington D.C.

Multiple version iconThere are 2 versions of this paper

Date Written: July 14, 2020

Abstract

We examine the effects of a 2012 regulatory reform that mandated fee and perfor- mance 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 contribu- tions 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: Defined Contribution, Expense Ratio, Performance, Mutual Fund, Flows, Participants, 401(k), Regulation, Disclosure

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 (July 14, 2020). 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 )

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Veronika Krepely Pool

Vanderbilt University - Owen Graduate School of Management ( email )

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Indiana University - Kelley School of Business - Department of Finance ( email )

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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
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AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Irina Stefanescu

Federal Reserve Board, Washington D.C. ( email )

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

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