Federal Regulators Seek to Toughen Fee Disclosures for Retirement Plans
It looks like federal regulators will propose new rules this year requiring more stringent fee disclosures for mutual funds, insurance companies and others managing retirement plans. SEC Chairman Christopher Cox recently stated his desire that companies managing mutual funds and retirement funds be required to report "one simple number" encompassing all expenses and fees in their products. The goal is to make fees and trading costs more transparent and easy to read for investors and those selling the product as well. www.latimes.com/business/la-fi-hiddenfees4apr04,1,2894056.story
This lofty goal is easier said than done. In the first place, devising disclosure rules for a variety of investments and retirement plans involves more than one regulator. While the SEC oversees mutual funds, the Department of Labor (DOL) has wide authority over 401(k) and other employer-sponsored retirement plans. It, too, has announced a desire to require investment companies to provide fuller and more understandable disclosures. www.investmentnews.com/apps/pbcs.dll/article The SEC, DOL and other regulators will need to collaborate to ensure that changes to disclosure requirements under different laws are complementary.
The complexity of annuities, mutual funds, and retirement plans also makes the "one simple number" approach difficult. Simpler but fuller disclosures -- if attainable -- would be a positive step for investors and the financial industry in general. Particularly if the rules adopted provide for more uniform and consistent disclosures across the industry, which would enable investors and planners to better compare products, leading to enhanced competition and reduced plan costs. At this stage, the SEC is gathering comments, with a formal rule proposal anticipated later this year.
