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Disclosure
New Fee Disclosure Requirements for Retirement Plan Sponsors and Participants
 

 

In July, the Department of Labor issued new rules designed to expand the disclosure of service providers’ fees to fiduciaries of 401(k) and other retirement plans. The regulation is intended to help fiduciaries – typically the companies sponsoring the plans – determine the amount of compensation paid to retirement plan service providers, including mutual fund companies, recordkeeping services and other third-party administrators. The regulation is also targeted at identifying any conflicts of interest that service providers may have. Under the new rules, which take effect in July 2011, service providers must disclose to plan fiduciaries all fees charged for their services, including revenue-sharing arrangements between mutual fund companies and service providers.

 

In mid-October, the Department of Labor released additional disclosure rules – in this case, requiring fiduciaries to disclose to retirement plan participants all fees being charged to participants for plan investments and administration. Under these additional rules, beginning in January 2012 for most plans, plan fiduciaries must:

 

  • Provide plan participants with quarterly statements of plan fees and expenses deducted from their accounts
  • Furnish core information on plan investment options, including the cost of those options
  • Use standard methodologies to calculate and disclose expense information, for uniformity across the spectrum of investments that exist in plans
  • Present all information in a format that enables participants to compare a plan’s investment options
  • Offer access to supplemental investment information in addition to the basic information required


What do these new rules mean for plan sponsors, participants and service providers? All parties, especially fiduciaries, must be knowledgeable about the fees incurred in offering a retirement plan. Plan fiduciaries have a responsibility to make informed choices about the cost and structure of plans. And since most fees have traditionally been borne by plan participants, it is essential that participants are able to understand the expenses they are paying. Finally, retirement plan service providers must provide complete transparency on the types and amounts of fees they are charging.


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