The new fee disclosure regulations will force plan sponsors to deal with the quality of retirement plan they offer their employees. These new disclosures will help plan participants improve results by reducing expenses. Just a small decrease in expenses will mean a more successful retirement outcome for plan participants.
The final rule regarding this provision is more strict than the earlier versions, says attorney Fred Reish, an attorney with Drinker Biddle & Reath LLP. He points out that the wording in previous versions of the rule was more relaxed stating that employers could fire their advisors.Now, it’s a requirement and the employers must also notify the labor department.
“Before, the statement said that you should consider firing the provider but now they changed it and it’s very clear that it’s mandated that you must fire the provider,” he says.
While the language of the DOL refers to “covered service providers,” Reish says there’s no doubt that “covered service providers” include RIAs as well as providers and other types of advisors.
How big a deal?
While this provision may cause some advisors to worry, top advisors have already been doing this for eons, Alfred says. “The best independent advisors operating in the retirement space have been fully disclosing all of their fees for years. So, this rule is unlikely to even get their attention.”
But given that many small companies are overwhelmed by day-to-day concerns, giving their 401(k) plan fees more scrutiny will likely be placed on the back-burner, says Phil Chiricotti, president of 401(k) organization the Center for Due Diligence.
He predicts that employers don’t want to be charged with these types of tasks.
“Small-plan sponsors are going to outsource the disclosure work, or work with someone who can do it for them or terminate their plans,” he says. “They are not going to spend every moment on their retirement plans when they can hardly keep their box company, window company or whatever they make open. The burden on small plan sponsors is almost insurmountable.” See: Phil Chiricotti speaks out on broker-sold commissions, RIA fees and heresy.
Small business owners should begin to look for outsourcing opportunities with the fiduciary responsibilities mounting. The new fee disclosure regulations are just the beginning. This will only force plan sponsors to offer a better retirement solution to their employees.
Please comment or call to discuss how this affect your company.
- Fred Reish and Bruce Ashton Make Case for Benefits of Multiple Employer Plans (prweb.com)
- Three sure-fire 401(k) predictions for 2012 (401kplanadvisors.com)
- How Small Business Owners Can Fine Tune Their Company 401(k) Plans (401kplanadvisors.com)