April 1, 2012 looms as a date that may live in infamy for some 401(k) service providers. That's when the DOL's new 408(b)(2) regulation takes effect. This regulation requires all plan service providers to disclose their compensation to 401(k) plan sponsors. Service providers include anyone acting as a fiduciary, registered investment advisers, brokers, recordkeepers, third party administrators and consultants. But that's not the surprise.

What 401(k) plan sponsors might find shocking will appear in the compensation section of the service provider disclosure (services and a declaration of fiduciary status must also be disclosed). Compensation is defined as anything received directly and indirectly. Indirect compensation can include cash or non-cash items the service provider receives as a result of providing a service to the plan. Most plan sponsors will already know the amount of direct compensation. This indirect compensation may startle them.

Prior to 408(b)(2), service providers had no requirement to disclose indirect compensation (we'll leave it up to ethical philosophers to determine if they had an obligation to disclose). Many 401(k) plan sponsors, who are paid to specialize in their company's product, not in their retirement plan, simply don't have the experience or know-how to ask the right questions of service providers in order to uncover these hidden fees. This all changes as of April 1, 2012, and that might just scare some 401(k) service providers.