Featured Topics
Retirement Industry
Magazine Archive
Education/Advice
Where Do you Go for Financial Advice?
Beginning April 1, 2012, new Department of Labor regulations under 408(b)(2) will require “covered service providers” (CSPs) to disclose information about fees and services to plan sponsors of Employee Retirement Income Security Act (ERISA) retirement plans. Under 404(a)(5), plan sponsors have 60 days from the effective date of the 408(b)(2) plan sponsor disclosure rules (May 31, 2012) to provide fee information to participants. ERISA plan fiduciaries are required to ensure the fees and expenses the plan incurs are reasonable and appropriate. Causing the plan to pay more than “reasonable” fees and expenses could result in a breach of ERISA fiduciary duty and a “prohibited transaction” under ERISA. Workshop participants acknowledged that fee disclosure reporting and communication are complicated when plans maintain multiple investment providers—and even more so when legacy vendors raise questions on orphan and grandfathered accounts. They also expressed concerns when dealing with plans that contain individual contracts and/or custodial arrangements. In addition, disclosure obligations aren’t clear when the plan sponsor does not know whether its plan is subject to ERISA. In addition to these operational challenges, workshop participants agreed that many constituencies are uncertain about their obligations under the new rules. For example: Plan sponsors don’t understand the scope of their participant disclosure obligations under 404(a) or their fiduciary obligations under 408(b)(2). Advisers are unaware of their disclosure obligations under 408(b)(2) and have not embraced their role as a covered service provider. Service providers are focused on their own obligations; no one is focused on the broader issues of disclosure coordination. A fair number of workshop participants indicated they have responded to requests for proposals (RFPs) from non-ERISA 403(b) plans in which the fee disclosure information was modeled on the DoL rules. Some of the participants stated that a few existing non-ERISA clients recently have also requested more comprehensive fee disclosure information. The general consensus of both groups was that service providers working with 403(b) plans exempt from ERISA should expect to see requests from more and more plan sponsors on fees modeled on the DoL rules.
Beginning April 1, 2012, new Department of Labor regulations under 408(b)(2) will require “covered service providers” (CSPs) to disclose information about fees and services to plan sponsors of Employee Retirement Income Security Act (ERISA) retirement plans. Under 404(a)(5), plan sponsors have 60 days from the effective date of the 408(b)(2) plan sponsor disclosure rules (May 31, 2012) to provide fee information to participants.
ERISA plan fiduciaries are required to ensure the fees and expenses the plan incurs are reasonable and appropriate. Causing the plan to pay more than “reasonable” fees and expenses could result in a breach of ERISA fiduciary duty and a “prohibited transaction” under ERISA.
Workshop participants acknowledged that fee disclosure reporting and communication are complicated when plans maintain multiple investment providers—and even more so when legacy vendors raise questions on orphan and grandfathered accounts. They also expressed concerns when dealing with plans that contain individual contracts and/or custodial arrangements. In addition, disclosure obligations aren’t clear when the plan sponsor does not know whether its plan is subject to ERISA.
In addition to these operational challenges, workshop participants agreed that many constituencies are uncertain about their obligations under the new rules. For example:
Copyright ©1989-2012 Asset International, Inc. All Rights Reserved. No Reproduction without Prior Authorization