(Bloomberg News) Putnam Investments says it will increase transparency of retirement plan fees, showing account holders online the costs they pay on each investment, ahead of requirements from the U.S. government.

Regulators and legislators are studying fees for 401(k) plans as more workers use them to save for retirement. Expense ratios are the most consistent predictor of performance, with lower-cost funds typically beating higher-cost funds, said Laura Pavlenko Lutton, editorial director in the mutual-fund research group of Morningstar Inc., a Chicago-based research firm.

"This is not a knee-jerk reaction to anticipated regulation," said Edmund Murphy, managing director and head of Boston-based Putnam's defined contribution business including about $17 billion in employer-sponsored retirement plans. "This is one of the many ways to strengthen and enhance the 401(k) system."

Fees haven't been easily visible for savers, Murphy said. Putnam will let participants in its 401(k) plans view the expense ratio for every underlying investment and show that cost in dollar figures starting this month, and will be updated in real time with changes in the market value of their holdings, he said. The website feature also will list fees for administration and any transaction, such as a loan or transfer of funds.

Representative George Miller, a California Democrat and chairman of the U.S. House Education and Labor Committee, has introduced legislation on 401(k) fee disclosure that passed the House of Representatives in May.

'No-Brainer'

"Unfortunately, there is no requirement to disclose the fees that are eating into your 401(k) account," Miller said in an e-mail yesterday. "As more Americans are put in charge of their own retirement, it's a no-brainer that they should know how much Wall Street is taking from their savings."

The bill, which has not passed in the Senate, would require fund companies to disclose 401(k) fees to participants before they enroll so "they know what they are buying" and "don't have to dig around in a prospectus," said Aaron Albright, a spokesman for the House Education and Labor Committee.

Fund companies would also have to disclose expenses for each investment in the account and report in quarterly statements how much a participant paid in fees. The legislation would also require 401(k) providers to break down fees for employers so they can shop around to find the best deal for their workers, Albright said.

"Everything is up in the air," Albright said of the prospects for the legislation passing Congress.

Compensation Rule

The U.S. Department of Labor announced a rule in July that would enhance disclosure of 401(k) fees to employers who sponsor the retirement plans by requiring plan providers to report direct and indirect compensation received in connection with account services. The requirement will take effect July 16, 2011, the Labor Department said.

The Labor Department is scheduled to announce rules related to fee disclosure for participants tomorrow, Gloria Della, a spokeswoman for the department, said in a telephone interview yesterday.

The number of workers enrolled in traditional pension plans, where employers generally provide retired employees with lifetime payments, fell to about 19 million in 2007 from 27 million in 1975, according to the Labor Department. In that same period, workers in defined contribution plans such as 401(k)s increased to 67 million from 11 million.

Putnam is releasing its website feature to 401(k) participants through the end of the year. About 30,000 investors will have access to it as of Oct. 22, said the firm's Murphy.