Understanding Employee Benefits

Reminder: Retirement Plan Fee Disclosures Received? –Review and Pass it Along

By | August 13, 2012

Defined contribution plan fiduciaries were required to receive fee disclosures from covered service providers by July 1, 2012 pursuant to final regulations under ERISA §408(b)(2). See Blog Posts. http://benefitsnotes.com/2012/05/labor-issues-qas-on-required-fee-disclosures-to-participants/  http://benefitsnotes.com/2012/04/408b-2-disclosures-that-wasnt-so-bad-was-it/ A separate Labor Regulation now requires that plan administrators provide an initial fee disclosure to plan participants and beneficiaries by August 30, 2012 and begin showing detailed plan expense information in participant quarterly statements thereafter.

 Although this requirement is imposed on plan administrators, due to the amount of necessary detail required, in most cases the investment companies, platform providers or investment advisors are agreeing to assist in the preparation and mailing of these required notices. If you have not been contacted by your plan providers, you must do so immediately to determine who is preparing the initial disclosure and verify that the August 30 deadline will be met. The initial fee disclosure includes:

 General plan information, such as how to enroll, how to direct investments and a current list of investment options.

  1. Administrative expense information, explaining any fees or expenses for general plan administration that may be charged or deducted from all individual accounts for legal, accounting and recordkeeping.
  2. Individual expense information – fees and expenses that can be charged to a participant’s account for specific actions taken such as loans, qualified domestic relations orders.
  3. Investment related information – including 1, 5 and 10 year performance for each fund option, appropriate benchmarks for each period and total annual operation expenses as a percent of assets and as a dollar amount for each $1,000 invested.

 The disclosure must include an Internet website address to point participants and beneficiaries to for specific additional information about the investment options for those who want more or more current information.

 What do I do next? First, make sure you have received the required fiduciary disclosures and have determined that the fees disclosed are reasonable.  Next, as mentioned above, if you have not been contacted by your service providers offering assistance in preparing and distributing the required participant notices you should contact them and find out what assistance is available. If you have received a draft participant notice, you need to review it carefully because it is the plan administrator’s fiduciary responsibility to provide the notices. Errors in disclosures prepared by your service providers will be your responsibility as plan administrator. Once the disclosures have been prepared and distributed to participants you should be prepared to receive questions from plan participants about the expenses described in the disclosure statements. You may need to designate a person at your Company or with a particular service provider who is prepared to respond to such questions on a consistent basis. One issue that we are aware of is that benchmark information used by investment companies and platform providers are often different from the benchmarks used by the investment advisor and the retirement plan committees and fiduciaries. You should be prepared to explain this difference and other plan expenses charged to the plan.

Contact Jeffrey Cairns for more information.