Providing clarity to your 401(k) participants: A story of disclosure

(AP Photo/J.D. Pooley) (AP Photo/J.D. Pooley)

Ask parties on some different ends of the retirement industry food chain about fee disclosure regs and you’ll get some very different opinions – ranging from a sense of satisfaction to unfettered panic.

A common thread emerges, however: As the days get closer to the July 1 deadline for service providers to offer disclosures to plan sponsors and the Aug. 31 deadline for initial notices to plan participants, the pure efficiency of offering electronic options is still a hotly debated topic.

Chad Larsen, president of Moreton Retirement Partners in Denver, Colo., gets to confront the more challenging end of the spectrum, the small employers who have been left largely to their own devices to examine, synthesize and act on the EBSA regulations. Larsen handles both ERISA and non-ERISA plans with more than 100 small companies, and he’s working hard to minimize the chaos.

“I’m still amazed how many employers don’t have anything prepared,” Larsen notes. “Our firm has had about three years in preparation for this and we’ve spent a lot of time prepping our employers. Overall, I think the regulations will be very beneficial – we’ve always had our own written disclosure statements, and that’s really validated our agreements – but they’re also going to be very cumbersome.”

Larsen said the costs involved are a major part of the problem, but the biggest issue will be participants themselves, who will be loaded down with information they may not be able to process any more easily than the already complicated and sometimes disconnected relationship they have with their 401(k) accounts.

“I simply think most participants won’t understand it, and that’s where the disclosure regulations missed their mark,” he adds. “Just getting a 20-page disclosure document isn’t going to make you walk away any more informed. And it really is going to add costs to the administration of plans; I don’t think those expenses have been factored into the fees.”  

[See also: Fee disclosure communication guide]

Jim Douglas, ERISA attorney with Transamerica Retirement Services, says the move to more electronic communications is simply part of a broader move in the business, though it still will require a bit of a learning curve for many involved. As will the last stages of the disclosure process itself.

“For the independent advisor, I would say that you need to take some extra time to educate yourself before the deadlines approach,” he says. “While there are lots of resources available out there for advisors who are affiliated with firms, it’s certainly going to be tougher for those independents.”

He suggests independents talk with their recordkeepers and their TPAs to figure out the details and make an informed decision on the best way to present the required information.

“For plan sponsors, I don’t think it will be all that different than what we’ve been doing,” he adds. “Personally, we’re using the same documents and we haven’t had to disclose anything that we didn’t in the past. The industry always wanted to provide more information; I think it’s a good thing to have a consistent approach across the board.”


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