The new fee regulations are meant to give plan sponsors te tools to choose the best retirement plan for their employees and themselves. Many plan sponsors are unaware of their fiduciary responsibilities and the risks that go along with them. Many bokers and agents are unaware of these same fiduciary risks and responsibilities. Many brokers and agents are aware but choose to ignore telling the plan sponsor for fear of losing the sale.
Fiduciary Trust Building (Photo credit: ToastyKen)
Fiduciaries are only required to act if they believe disclosure has not occurred. The regulations require a fiduciary who believes the disclosure has not been made to affirmatively write to the Covered Service Provider requesting such disclosure and to take immediate steps to terminate the contract if the information is not provided. However, the regulations do not allow a fiduciary to avoid asking for disclosure and then avoid knowing whether it occurred.
Compliance Deadline Dates get extended, so be careful of what you read. The current date for compliance is July 1, 2012, and the deadline for the 404(a) participant disclosure rules is now August 31, 2012. These dates may continue to get extended so watch for updated information.
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.
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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.
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Many plan sposnors suffer from ‘they don’t know they don’t know’. This new fee disclosure regulation will force them to understand and monitor the fees in their company sponsored retirement plan.
“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
