Employers struggling to decode the service provider fee disclosures from their retirement plans may be getting some relief. Nearly two years after the U.S. Department of Labor published a proposed rule requiring covered service providers to disclose the cost of what they do for employer-sponsored 401(k)s, the agency is requesting more help for plan sponsors trying to navigate this detailed information.
Amendment Requires Disclosure Guide
DOL on March 11 released a 54-page proposal titled “Proposed Regulation to Require a Guide to Assist Plan Fiduciaries in Reviewing 408(b)(2) Disclosures” that would amend the 2012 rule, known as the “408(b)(2) regulation,” to require covered service providers to furnish a guide to multiple or lengthy documents in their fee disclosures.
The agency said the Notice of Proposed Rulemaking results from employers, especially small businesses, “having a hard time locating the required fee disclosures when they are embedded” in longer or complex documents.
ERISA requires plan fiduciaries to act prudently in the interest of plan participants and to ensure that only “reasonable” compensation is paid for plan services.
Such a guide had been suggested by DOL, but not required, when the final rule took effect in 2012. The agency said at that time it would later demand that service providers furnish these. DOL said a summary without some guide to the underlying disclosures could become the primary document on which some responsible plan fiduciaries rely, which is not what it intends.
Assistant Secretary of Labor for Employee Benefits Security Phyllis Borzi in the press release described the proposed requirement as being “much like a roadmap” for plan sponsors. They, in turn, are mandated by a similar DOL rule to provide to their plan participants annual disclosure about the expenses paid to administer and invest their retirement funds, including fees charged back to the participants’ own accounts.
The new guide would have to identify the document, page or other locator that can be used by the plan sponsor to find fee information quickly and easily, the release said.
The NPRM on disclosure guides is open for public comment until June 12. The amendment will become effective March 12, 2015.
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