Advisor council wants DOL to survey more plans on fees

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The Retirement Advisor Council said Monday it has suggested to the Department of Labor that the agency survey 401(k) plans of all sizes in its effort to evaluate the effectiveness of disclosure requirements.

The 408(b)(2) regulation, issued by the Employee Benefits Security Administration in 2012, requires 401(k) plan administrators to fully disclose their fees in a way that makes it easier for plan sponsors to understand what they are paying for.

Noting that the DOL’s initiative is limited to small pension plans with fewer than 100 participants, the council said, “Conclusions from this study will impact plan sponsors across size bands. For this reason, we recommend the universe studied be expanded to cover the entire spectrum affected by regulation 408(b)(2).”

Specifically, the council suggested the DOL include in its sample fiduciaries of large plan, and that it “stratify” the sample to over-represent plans with 100 to 1,000 employee and plans with 1,000 or more employees.

The council also challenged what it called the underlying assumption that a written guide, paper or electronic, will satisfy plan sponsors’ need for help with 408(b)(2) disclosures. “To act with prudence, many rely on the services of a Professional Retirement Plan Advisor,” it said. “The assistance the best-written guide can provide pale in comparison with the interaction between a plan sponsor and a plan advisor familiar with the sponsor, participant demographics, plan design, and investment policy.”

In addition, the council addressed the methodology used by the DOL. The agency’s plan calls for conducting eight to 10 in-person focus groups in select locations with seven to 10 sponsors in each group.

“As an alternative, we suggest the agency conducts four online focus groups with a nationwide sample of 10 to 12 plan sponsors in each group. Our rationale is that focus groups are qualitative in nature, meant to discern a range of attitudes or behaviors, not their frequency,” the council said.

Finally, the council recommended that EBSA verify that the individual who moderates focus group discussions and conducts in-person interviews is experienced working with retirement plan sponsors.

“A generalist moderator with peripheral understanding of retirement plans will not draw the quality of information the agency needs to support rule-making in what is by nature a technical field,” it said.

As for the discussion guide the DOL intends to use, the council recommended it use more neutral language, such as eliminating the term “hidden fees,” which it says has been rendered “obsolete” by two years of standardized 408(b)(2) disclosure. 

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