New 408(b)(2) “Guide”: Not Necessarily What 401k Plan Sponsors Hoped For

English: Allied Insurance Company of the Maldi...
English: Allied Insurance Company of the Maldives - Front Office (Photo credit: Wikipedia)

Here’s the first concern Reish brought up: The regulation doesn’t currently require disclosures be made in any particular format. Since the presentation, the DOL has published a FAQ “guide,” but, again, that guide does not endorse any particular format. The result, warned Reish, is that multiple documents may be used. In an interview following his presentation, Reish told, “I am worried that many plan sponsors/fiduciaries will not make the effort to wade through hundreds of pages of printed materials to locate and understand the fees and costs….and therefore will not evaluate those costs.” He, however, leaves us with this hopeful expection: “Fortunately, advisers who are focused on retirement plans will help many of those sponsors by using benchmarking services.”

In fact, service providers are already starting to release disclosures in just such an expansive manner. Sam Paglioni, Partner at Integer Wealth Advisors Group, LLC in Kennesaw, Georgia, has firsthand experience of the consequences Reish warns of. Paglioni recently obtained a fee disclosure from an insurance company. Of the report, which “stretched out over 15 pages,” he says, “It will be left up to the client to try and parse the information.” He says the report also contains and extensive fee chart with a myriad of fees. “All I was looking for, for our client, was somewhere that organizes it all for the client: Here’s what we are paid, here’s what they are paid…..nothing, they do not ‘roll up’ anything into separate numbers,” says Paglioni. “Now, they do outline the mutual funds used and break that out accordingly, but they do not bother to ‘wrap it up’ for the client. The client will have to go and figure it all out (which is what I’ll do).”

The new fee disclosure regulations become effective July 1, 2012 and most pplan sponsors are unaware of the requirements and consequences. It appears service providers like insurance companies to ‘hide’ fees by including the necessary information in massive amounts of paper.

PLease comment or call to discuss how you must analyze the required data.

Posted via email from Curated 401k Plan Content

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