The U.S. Department of Labor’s Employee Benefits Security Administration has asked for comments on a proposed rule that would require pension plan service providers to furnish employers and other plan fiduciaries with a guide to assist them in navigating fee disclosure documents.
In 2012, the DOL published a final rule requiring companies that provide services to employer-sponsored defined contribution plans, like 401(k)s, disclose information about the compensation they receive, including payments from third parties.
And while most companies have complied with the request, they don’t necessarily make it easy for providers or plan participants to understand what they are paying in fees. Many times the fee disclosures come in the form of lengthy documents or the information is spread out over multiple documents.
The proposal announced this week would amend the fee disclosure rule for service providers to require them to furnish a guide if disclosures are made using multiple or lengthy documents. The guide must specifically identify the document, page or other specific information so that employers can find the data quickly.
The notice of proposed rulemaking is open for public comment. The notice also references an announcement by the department to conduct focus group sessions with fiduciaries to pension plans with fewer than 100 participants. The purpose of the focus groups is to explore current practices and effects of the 2012 fee disclosure rule. The hope is these groups will give the department additional information about the need for this proposal and what disclosure formats would be the most helpful to plan fiduciaries.
“The department’s recent fee disclosure rules were a good first step in bringing transparency to the 401(k) industry and disclosing potential conflicts of interest. However, some employers, particularly small businesses, may be having a hard time locating the required fee disclosures when they are embedded in lengthy or complex documents,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis Borzi. “Much like a roadmap, a guide can help employers locate fee information, which will help them better understand what they are being charged by financial services providers.”