Does this sound familiar? Your first phone call or email of the day is from an angry C-level executive at one of your newest clients. Their beef: Some employee just complained about all the new fees they're paying.
You're just a bit confused. You just sold the client because you saved him almost half on fees. Now he's calling to complain because the participant statements just started showing new fees. If you're frustrated, just imagine if this executive just read Fred Reish's latest warnings to plan sponsors.
If we're to believe Reish, the days of off-loading fee-related questions with a what-do-I-know shrug of the shoulders by naïve plan sponsors is over. With the implementation of Rule 408(b)(2) in the summer of 2012, comes the risk being charged as an accessory to a regulatory crime. The DOL is now holding plan sponsors – not just their vendors – responsible for fee disclosure. A plan sponsor can no longer merely accept from the vendor a piece of paper claiming to contain fee disclosures, file it and forget about it, thinking they're job is done. No, if the plan sponsor can't knowingly explain the fees, they run the risk of being caught using vendors who haven't disclosed fees.
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And the law says plan sponsors have 90 days to fire vendors who don't disclose, lest they be held as an accomplice in the vendor's failure to comply with Rule 408(b)(2).
Ouch. Chances are that angry exec on the other end of the phone or email hasn't even considered this new reality.
But, in this particular example, perhaps there's a solution that saves all. Remember, this is a new client. It means they just switched. It probably means they switched at the end of last year. If that's the case, the employee who is complaining about the "new" fees probably never saw the actual fees paid to the former vendor. Given this, there's a possibility the old vendor never disclosed the fees as required by law. As a result, the plan sponsor had 90 days to pick a new vendor.
And the plan sponsor did pick a new vendor – you.
So there you have it. From being potential culpable, the plan sponsor now is merely compliant. You've made him into a hero – and no one can get angry about that.
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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).
