“Business leaders are challenged by rising healthcare and benefits costs, heightened government oversight, and new regulation. At the same time, the importance of fee transparency, fiduciary responsibility, and participant education cannot be overlooked,” said Greg Tschider, CEO of Verisight, Inc. “Our survey highlights the challenges employersface in balancing new priorities. Devising a strategic approach is always important, but is especially critical now as the industry prepares for more changes.”Regulatory Wake-up Call
Effective April 1, 2012, a new retirement plan fee disclosure rule mandated by the Employee Retirement Income Security Act (ERISA) will require all 401k retirement plan service providers to begin providing increased fee disclosure to sponsors and plan fiduciaries. Additionally, on May 31, 2012, new participant fee disclosures rules from the Department of Labor will go into effect. However, the survey indicates that as many as 61 percent of companies do not feel prepared to respond to these new fee disclosure regulations. Furthermore, executives believe that only 3 percent of employees fully understand the cost of their retirement plan.
Further confusion exists around fiduciary standards. While a whopping 87 percent of employers use an external or third-party investment advisor, a third (34%) are unsure what their advisor’s fiduciary responsibility means and 27 percent work with advisors that are not fiduciaries.
Additional findings from the Verisight and McGladrey Survey include:
When evaluating compensation decisions, employers take the following into account:
- Challenge of retaining key employees (52%)
- Desire to incent employee performance (48%)
- Challenge of attracting talent (43%)
When deciding what is most important in evaluating a retirement offering:
- Fifty-nine percent consider the costs of investments and also quality and level of service
- Only 32 percent care about the reputation of the provider
- Only 24 percent care about the availability of specific investment options
Now is the time for plan sponsors to prepare for the new regulations. Many top employees will begin to ask questions on the fees paid in their plan.
Please comment or call to discuss how this affects you and your company.
- The Future after Fee Disclosure and the Crystal Ball (401kplanadvisors.com)
- Fiduciary Responsibility for Plan Investments. (401kplanadvisors.com)
- A Closer Look at Fiduciary Status Under ERISA (401kplanadvisors.com)