UPDATE: Obama Administration Seeks To Improve 401(k) Flexibility, Disclosure

The Obama administration took steps Thursday to improve the transparency and flexibility of 401(k) plans, saying the effort will provide more security for millions of Americans saving for retirement.

The Labor Department issued a final rule requiring service providers to disclose the administrative and investment costs of the popular retirement plans, though the effective date was extended for three months to July 1.

Seeking to cast a light on the often hidden fees related to administering retirement funds, the rule will give employers access to information on the range of compensation going to mutual funds, record keepers and financial advisers. In turn, employers will have to start providing more information to their workers to help them comparison shop under a separate rule that will go into effect at the end of August.

"Improved fee disclosure may lead to lower overall fees if plan sponsors can better assess the value and worth of the services provided," said Alan Krueger, chairman of the Council of Economic Advisers, and Gene Sperling, director of the White House National Economic Council, in a blog post. President Barack Obama's top economic advisors tied the announcements to the "built to last" them of the State of the Union speech last week and the idea hard work should pay off.

Some firms have already started providing more disclosure of fees and offering more low-cost funds, with companies like Fidelity Investments and BlackRock Inc. (BLK) setting up index mutual funds as an alternative to higher-fee actively managed funds.

Meanwhile, Treasury proposed new regulations to make it easier for retirees to receive a stream of income during their lifetime. The proposals would encourage the use of partial annuities to let retirees receive regular income while keeping a portion of their assets invested, as well as to remove a regulatory obstacle to allow older retirees to buy an annuity.

As employers have increasingly switched from defined-benefit pension plans to defined-contribution 401(k) plans--whose assets have multiplied more than four-fold to $4.3 trillion over the past 20 years--it has become harder for retirees to manage their savings to avoid the risk of outliving their savings or unnecessarily cut back on spending. The administration hopes that easing access to lifetime income options will reduce such risks.

"Having the ability to choose from expanded options will help retirees and their families achieve both greater value and security," said Treasury Secretary Timothy Geithner in a statement.

The Labor Department postponed a proposal that would require service providers to create a summary document of the fee disclosures, but said it would publish a plan for public comment "in the near future."

The rule issued Thursday does include a sample summary, with a directory of where to find the various fees, but the department will seek comments on the issue within the next couple of months, a senior administration official told reporters on a conference call.

The official said that when the fee-disclosure rule was proposed earlier this year, "We got lots of comments, many of which strongly endorsed the idea that we require a summary or guide, but unfortunately none of which gave us much detail on how to do that."

-By Tom Barkley, Dow Jones Newswires; 202-862-9275;

tom.barkley@dowjones.com

--Kelly Greene and Anne Tergesen of The Wall Street Journal contributed to this article.

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