Improving Readability of Participant Fee Disclosures

“I work in HR at an Employee Retirement Income Security Act (ERISA) 403(b) plan sponsor. I realize that we have to provide an annual fee disclosure to participants, but in reading it, it is so boring! As a HR communications specialist, it is just not the type of communication I think our participants will actually read! Isn’t there anything we can do to ‘spice it up’ a bit and improve its readability?”

Stacey Bradford, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

Actually the Department of Labor’s Model Chart for participant fee disclosure is not bad as far as required disclosures go—it is much more readable than, say, a Summary Annual Report—but its length, which can exceed 10 pages depending on the number of investment options offered, is indeed likely to discourage many participants from reading it.

However, there is nothing in the final rule for participant fee disclosures that would prevent a plan sponsor from augmenting the communication by including, for example, a simple explanation of the plan fees (e.g., dollar amount of recordkeeping and other administrative fees, dollar amount of investment fees, etc.) in the mailing that perhaps, might grab the attention of plan participants, especially if it is limited to a single page and is written in language designed to engage the participant.

Furthermore, once the proposed regulations regarding electronic disclosures are finalized, there could be an opportunity for plan sponsors to provide an even greater degree of customized fee disclosure to participants, as they will not need to worry about additional mailing costs associated with enhancing the required participant fee disclosures. Plan sponsors might even be able to take advantage of current technology to provide participants with a state-of-the-art, personalized fee disclosure experience!

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.