March comes in like a lion and goes out like a lamb. Plansponsors should expect nothing of the sort. The end of March, as ofthis writing, is scheduled to usher in the DOL’s new fee disclosurerequirements. Originally slated to become effective in July 2011,the date got pushed back due to industry pressure. It may getpushed back again, but these requirements won’t be delayedforever.

Rest assured, however, the lions of the 401(k) industry willbegin duking it out well before the effective date. Already inJanuary 2012, Vanguard has come out with a controversial new“low-cost” 401(k) package. The controversy deals with bothfiduciary issues and its definition of fees. It’s this lattercontroversy that signals the start of hostilities. Industryheavyweights, long concerned more with keeping clients captive withone-stop-shopping schemes, will begin trying to redefine what “fee”is.

Truth be told, some fees matter and some fees don’t matter.Savvy sales folks will try to convince 401(k) plan sponsors to paymore attention to the fees that matter than to the fees that don’tmatter. Smart 401(k) plan sponsors will know this. Smartprofessional fiduciaries will rub the faces of every 401(k) plansponsor in the reality of fee disclosure until they all becomesmart.

What’s the best strategy for smart 401(k) plan sponsors in thenew world of fee disclosure? First, it’s to know what fees matter.Second, it’s to make sure fee data is obtained for each service.The DOL provides mixed guidance on this. For one, the DOL suggests401(k) plan sponsors review fees that don’t matter. Additionally,the DOL literature emphasizes total fees without explaining theneed to account for fees separately by service type (the only wayto insure the “best of breed” of the ideal 401(k) plan, accordingto a 2010 Northern Trust analysis).

Here’s what smart 401(k) plan sponsors will do. They’ll focusfirst on out-of-pocket fees (i.e., the ones that produce invoices).Those are the easiest to account for. Next they’ll dig deeper intotheir investment offerings and uncover all revenue sharing and12b-1 arrangements. A case can be made that revenue sharing and12b-1 arrangements are a good predictor of poor investmentperformance. In fact, there’s a study that shows this. And speakingof a fund’s expense ratio, smart 401(k) plan sponsors will know notto use them to compare funds with different objectives.

Finally, smart 401(k) plan sponsors will make sure they knowexactly what they’re paying for each service—trustee services,custodian services, recordkeeping and TPA services, auditingservices and investment management services. (All smart 401(k) plansponsors know what these services are and how they impact theplan.) By breaking out the fees this way, smart 401(k) plansponsors will make sure no one provider is using fees from oneservice to subsidize another service.

Smart 401(k) plan sponsors who use these two strategies willensure they’re not lambs sleeping among lions—the best strategy forsurviving March.