401(k) Fee Disclosures: It’s Time for Employers to Prepare

Employers who are proactive and address the fee disclosure regulations will experience less questions from employees and less stress. This regulation will separate the good from the bad. You and your employees deserve a good quality retirement plan that is fairly priced. It’s not about being the cheapest it’s about receiving a good value for a reasonable price. Eliminate all the pay points that do not add value to your plan.

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Now is the time for employers to prepare for the August 30 deadline. Responsible plan fiduciariesand plan administrators should take the following steps now.

  • Determine which plans and which service providers are covered by the requirements.
  • Develop a plan for assessing the completeness of service provider fee disclosures when they are received and setup a communication link with the service provider to correct incomplete disclosures.
  • Clarify with service providers who will formulate and distribute specific participant-level disclosures, including integrating certain service provider disclosures into the participant-level disclosures.
  • Establish a procedure for notifying the Department of Labor if complete information can not be obtained.
  • Establish ongoing processes to review and document the steps taking during the preparation of the fee disclosures to participants.

Employers who are proactive with regard to the new 401(k) fee disclosure regulations will experience a smooth transition. Those who ignore preparation will become reactive to employees questions.

Please comment or call to discuss how you company can prepare for the pending regulations.

  • U.S. 401(k) Disclosure Is Coming-What To Do In January (401kplanadvisors.com)
  • Should Your Company Hire an ERISA 3(38) Investment Manager for The 401(k) Plan? (401kplanadvisors.com)
  • Why 401(k) Fee Disclosure is a Big Win for Small Business Owners (401kplanadvisors.com)
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DOL says no extension on fee disclosure deadline

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There are many in the retirement plan industry desparately trying to delay fee disclosure, indefinitely if possible. This will not happen because the DOL understands how critical this information is to all Americans looking to retire someday. Ideally retire without the aid of the government.

The Labor Department has refuted claims that it plans to move the April 1 compliance deadline for new 401(k) fee disclosure rules to later in the year to give service providers time to make changes based on the final regulation.The 408(b)(2) regulation will require service providers to detail any fees they are charging plan sponsors. The final regulation could be issued before the end of January.

“The department is sympathetic to concerns by industry, but we haven’t signaled that applicability deadlines will be extended,” said a DOL spokesman. “We’re sympathetic to concerns, so we are aware of them. I’m not going to speculate where the current information is coming from.”

Reuters released a story on Wednesday stating that the department was thinking about moving the compliance deadline.

Whether the deadline is extended or not fee disclosure will happen. Plan sponsors should be aware of all the cost paid by their plan regardless. This benefit is far too important the future of all American workers.

Please comment or call to discuss how this affects you and your organization.

  • New Rules Will Have Fiduciary Impact (401kplanadvisors.com)
  • Service Provider Fee Disclosures Under ERISA (401kplanadvisors.com)
  • DOL investigations of Retirement Plan Financial Advisors (401kplanadvisors.com)
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US agency will repropose plan for a fiduciary standard

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Many insurance companies and brokerage firms are breathing a sigh of relieve over this announcement. In the end this will happen and perhaps hurt the financial institutions even more.

The initial proposal drew darts from numerous insurance and securities industry lobbying groups, including the National Association of Insurance Financial Advisers and the Financial ServicesInstitute who feared their salespeople would have to limit the products they could suggest for retirement plans.Various groups argued that retirement plan participants would see investment costs rise under the standard. They also said the Labor Department proposal would likely conflict with a separate fiduciary rule that the Securities and Exchange Commission is planning to govern brokers who give investment advice to individual clients.

The pension plan proposal also would have forced big brokerage firms such as Bank of America‘s  Merrill Lynch & Co. and Wells Fargo & Co.‘s Wells Fargo Advisors to decide whether to limit their brokers from working with corporate retirement plans.

The Labor Department rule would not only limit brokers’ ability to recommend their companies’ own products to employers but prohibit them from collecting commissions from investment companies when employees purchase their funds or other retirement plan products without providing extensive disclosure.

Is everyone forgetting ERISA 404a ‘for the exclusive benefit of the plan participant and their beneficiaries’? It seems the financial institutions are more concerned with their own bottom line and the the best interest of the customer.

Please comment or call to discuss.

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Pay To Play In 401(k)? Pimco, Dodge & Cox, American Funds Eyed

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At the request of Dow Jones, pension consultant BrightScope used its database to gauge payments by a handful of individual funds that are popular in retirement plans.

It estimated:

  • The Bill Gross-led Pimco Total Return Fund (PTTRX) pays about $145 million a year for what’s termed “shelf-space.”
  • The popular Growth Fund of America (AGTHX) pays $75 million a year to retirement plans.
  • The Dodge & Cox Fund (DODGX), whose managers are famous for refraining from self-promotion and avoiding the media, pays around $20 million a year.

Salisbury presented BrightScope’s numbers to all three companies. Pacific Investment Management Co., whose Pimco Total Return fund holds $50 billion in retirement assets on more than 13,700 plans according to BrightScope, didn’t comment directly on the figures.

Pimco did say it provides “a range of share classes” with different fee options for employers and investors. It also told Salisbury: “We strongly support efforts to bring fee transparency to both plan sponsors and participants.”

American Funds also declined to comment, but said it didn’t dispute BrightScope’s totals. Dodge & Cox said what it pays to plan packagers is “much lower than the industry average.”

The report notes that the Department of Labor has said it will require plans to start telling employees if payments from funds are used to cover plan costs starting next year.

If these funds are that good why do they have to pay to be included in 401(k) plans?

Please comment or call to discuss how this affects you.

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