written by Kathy Hillenburg

Kathy Hillenburg Head Shot

Employers may not know just how much your 401(k) fees and other amounts charged against your 401k plan’s investments (or paid to your vendors) are costing your plan or your employees—but as a fiduciary, it’s your responsibility to understand these fees and investment charges, and make sure they are reasonable.

New reporting and fiduciary requirements have been mandated due in part to statistics that report up to 83% of employees are unaware they are paying retirement plan fees. New disclosure requirements are intended to make fees more transparent.

Here are some important dates that you should note regarding the new fee disclosures this year:

July 1, 2012: Service providers must furnish in writing the fees they receive either via direct or indirect (revenue-sharing) sources to the responsible plan fiduciaries/401k sponsor. This is an actual agreement that needs to be obtained in writing by plan sponsors that, if ignored, will open up potential liabilities. Service providers not supplying this disclosure will be subject to the prohibited transaction rules which in turn will cause issues and potential excise tax or penalties for plan sponsors or fiduciaries in 2012.

August 30, 2012: Reporting fees to employees. “The initial annual disclosure of ‘plan-level’ and ‘investment-level’ information—including associated fees and expenses—must be furnished no later than August 30, 2012” to plan participants.

November 14, 2012: The first quarterly statement containing the fees and expenses actually deducted from the participant’s or beneficiary’s account must be sent or made available to the plan participant.

Employers should prepare now to meet the new disclosure requirements as follows:

  • Determine which plan service providers are covered by the fee disclosure requirements and contact them to acquire service contracts in writing.
  • Develop a plan for assessing the completeness and reasonableness of service provider fee disclosures when they are received.
  • Clarify with service providers who will formulate, prepare, and distribute specific participant-level fee disclosures information as required.

Please contact us if you have any questions. Additional information can be found at Department of Labor website: http://www.dol.gov/ebsa/newsroom/fs408b2finalreg.html