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advocacy community education
The 408(b)(2) regulations require full
disclosure of indirect compensation
from bundled service arrangements.
A reasonable estimate of the stand-
alone cost of record-keeping servic-
es, including a detailed explanation
of the methodology and assump-
tions, if compensation is for record-
keeping services.
There is a double-edged sword to the
disclosure of plan administration fees.
Since plan sponsors will finally know
the true cost of their plan's administra-
tion, they will have to be more vigilant
to determine whether the costs associ-
ated with their plan's administration is
reasonable when compared with the
rest of the industry. Plan sponsors
don't have to pick the most inexpensive
provider, but they must pick a provider
that charges a reasonable fee for the
services provided. A bare bones
provider should not be charging the
same fee as someone who puts out all
the "bells and whistles" when it comes
to retirement plans. Plan sponsors
should consider contacting an ERISA
attorney or retirement plan consultant if
they do not have the background to
make a decision whether or not the
providers' fees are reasonable.
For plan participants, the Department
of Labor will require 401(k) plans start-
ing Jan. 1, 2012 to clearly spell out all
fees and expenses each quarter so
that participants can more readily com-
pare the costs of their holdings.
Plan administrators, as fiduciaries,
must disclose to participants the
amount of plan-related fees and
accounts. The fees will be expressed
both as a percentage and a dollar
amount for each $1,000 invested. In
addition, plans must present current,
one-year, five-year, and 10-year per-
formance figures, along with compar-
isons to appropriate benchmarks.
Many critics of 401(k) fee disclosure
(mainly, the mutual fund industry) state
that the caveat of fee disclosure is that
participants are less likely to participate
if they understand the fees being
charged against their accounts. If par-
ticipants will shun saving for retirement
because of plan administration fees, is
it an issue of fee transparency or an
issue that the fees being charged might
be unreasonable? Isn't a major prob-
lem with 401(k) plans that there is a
lack of education given to participants?
We believe that knowledge and educa-
tion are important tools and the "hide
the ball" approach in 401(k) fees has
not done a world of good to 401(k)
plans and the retirement savings of our
country's workers, in general. We also
believe that 401(k) fee transparency
will only minimize retirement plan
sponsors' fiduciary liability, as well as
eliminate the cottage industry of 401(k)
fee lawsuits that have been feeding
ERISA attorneys for the last 10 years.
Fee disclosure will require more work
for plan sponsors and plan providers,
but the work involved will help the
401(k) industry and plan participants
everywhere because fees that are han-
dled over the table and under the table
should be disclosed. It will only help an
industry that certainly needs all the
help it can get.
David M. Snetro, AIF
is a senior vice
president of RDM
Financial Group,
specializing in
retirement plan
design, retirement
plan analysis, and plan participant
investment allocation strategies.
He can be reached via email at or
Ary Rosenbaum, Esq. is an
independent ERISA, labor, and
employee benefits law attorney.
He can be reached at via email at or
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