Compliance April 24, 2007

DoL Asks For Advice on 401(k) Fee Disclosures

April 24, 2007 (PLANSPONSOR.com) - The U.S. Department of Labor's Employee Benefits Security Administration is asking for suggestions on how to best approach 401(k) fee disclosures by retirement plans to their participants.
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Specifically, the department wants to know what administrative and investment-related fee and expense information participants should consider when investing their retirement savings, the manner in which the information should be furnished to participants and who should provide that information, according to a DoL press release.

Written comments on the fee disclosure issue should be submitted electronically by e-mail to e-ori@dol.gov or through the federal e-rulemaking portal at www.regulations.gov .  

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Paper-based comments should be sent to the Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5669, U.S. Department of Labor, 200 Constitution Ave., N.W., Washington, D.C. 20210, Attention:   Fee Disclosure RFI.

The information request by the DoL comes on the heels of Securities and Exchange Commission Chairman Christopher Cox’s announcement last week that the regulator would be turning its sights toward 401(k) plan fees. “With an emphasis on both the disclosures by the constituent investments in the 401(k), and the aggregate disclosures by the plan, we aim to make it far easier for busy Americans to understand the expenses they’re being charged in connection with their investments,” Cox said at the Mutual Fund Directors Forum (See  SEC Turning its Attention to 12b-1, 401(k) Disclosures).

The DoL cites a recent recommendations by the Government Accountability Office (GAO) about changes to improve disclosure of fees and expenses to plan fiduciaries and participants (See  GAO Urges Congress to Consider 401(k) Plan Fee Disclosure ).   

The issue has also moved into the legal arena as well. Last week, a federal judge for the U.S. District for the Southern District of Illinois refused Boeing Co’s request to throw out a lawsuit by three employees of the company who claimed it breached its fiduciary obligations by paying 401(k) providers excessive fees (See Boeing Excessive 401(k) Fee Suit Moves Beyond First Legal Round ).   

Benefits April 23, 2007

Sponsors Adopt New Strategies to Improve DC Offerings

April 23, 2007 (PLANSPONSOR.com) - A new report from Greenwich Associates reveals defined contribution plan sponsors are taking steps to improve their retirement plan offerings since DC plans are no longer considered supplemental to defined benefit offerings and are not providing financial security needed by retirees.
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“DC plan sponsors are adopting automatic enrollment, they are incorporating products that improve investment returns throughout the course of an employee’s working years, they are switching to institutional products that minimize fees and they are taking steps to maximize both their own contributions and those of participants,” said Greenwich Associates consultant Chris McNickle, in a press release. Plan sponsors are adopting new products and strategies as they realize their DC plans are now the most important aspect of their employees’ financial well-being in retirement.

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Roughly 20% of companies with DC plan assets of $250 million or more have adopted automatic enrollment and another 17% said they have plans to do so, Greenwich Associates found. Adoption of the automatic enrollment provision has been even more rapid within smaller plans, with 28% using automatic enrollment and another 24% planning to do so.

There is also a growing proportion of plans that are offering target retirement date and lifecycle funds as part of participants’ investment menu, the release said. Further, Greenwich Associates found employers are increasing their own contributions to employees’ DC accounts.

Some 95% of U.S. companies with plan assets of more than $250 million make matching contributions to their DC plans, as do 84% of smaller plans. Among large plans, nearly one in 10 said they increased their matching contributions over the past 12 months, and another 13% said they plan to increase contributions over the next one to three years. Among smaller plans, 12% have recently increased their contributions and 16% said they have plans to do so.

The report points out the focus on increasing the effectiveness of DC offerings is brought on by the combination of increased life spans, diminished DB offerings and the weakening of the social security system.

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