Isn't it funny that within a week of the industry complaining to delay the implementation of 408(b)(2) because of the lack of the much promised FAQ guide on the part of the DOL, the DOL comes out with its much promised FAQ guide? Under the name "Field Assistance Bulletin 2012-02 408(b)(2) FAQ Guide," this 38-question-and-answer compendium no doubt became an instant bestseller within the hallowed halls of 401(k)-dom.

Unfortunately, as Fred Reish warned at an industry conference recently, with or without the DOL's FAQ, the new Fee Disclosure Rule – a.k.a. 408(b)(2) – contains its fair share of traps for 401(k) plan sponsors, their service providers and plan participants. I'm sure there are plenty more, but here are the three most apparent reasons for each of these constituencies to fear what happens once the new rule is implemented come July 1st:

1)    401(k) Plan Sponsors – There are plenty of hazards in this new rule for this group, including jumbled and inconsistent formatting requirements (meaning every vendor can disclosure in a different manner), the impending volume of such disclosure (more pages only makes it harder to find key data) and, as Reish points out, the inevitable "race to the bottom" tired 401(k) plan sponsors will resort to when they only look at fees and not service value. But the biggest trap is this: 401(k) plan sponsors will now be held liable for service providers who fail to comply with the rule unless they fire those service providers. Given the likelihood of muddled reporting buried deep into a non-searchable ream of paper, how will otherwise busy 401(k) plan sponsors even know if the service provider is non-compliant?

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Christopher Carosa

Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).