The impending deadlines for plan sponsors to begin officially disclosing fees in the 401(k) space are approaching rapidly. America’s major retirement plan providers say they’ve been working on disclosure arrangements for years – evidenced by a litany of white papers and preparation guides available online. But are plan sponsors ready to meet the letter of the law for the July 1 408(b)(2) deadline to receive disclosure from all covered service providers, and where do you go to make sure you’re taking the right approach?
[See also: Fee disclosure communication guide]
1. Know who is providing services to the plan (who is a covered service provider), including a recordkeeper, advisor, lawyer or auditor.
Andy Miller, assistant director of retirement and investor services at the Principal, says 408(b)(2) necessitates clarity on all the various parties involved, from third-party administrators to law firms. “We’re getting a lot of questions from financial professionals on these issues,” he notes. “But we as a company began getting this disclosure information together in November so I feel that for the most part, people are ready.”
Want the official version? EBSA’s Fact Sheet is succinct on its statements on the scope of service providers, and the timing:
2. Review your fees and services, document actions and decisions and keep in your fiduciary file.
“This is critical,” Miller says. “You have to look at questions such as, ‘are these fees reasonable for the services provided?”
3: Determine who you need to provide disclosure to
4. Understand how participants are paying fees:
Investment expense, deduction, asset charge or participant-level fees, such as loans
“These can also be tricky,” Miller notes. “Clarifying if those are per-head fees or asset-based fees will be important, as they’ll need to be reported on a quarterly basis. The individual participant-level fees, like loans from their accounts, also need to be made available.”
5. Know your deadline for participant disclosure
July 1: Deadline for plan sponsors to receive fee disclosure data from all covered service providers.
August 30: All 401(k) plan sponsors must disclose most plan facts and investment fees.