Complying with DOL Rules on 401(k) Fee Disclosures | Plante Moran
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Benchmarking Surveys Can Help Mid and Small-Sized Businesses Comply with New DOL Rules on 401(k) Fee Disclosures

Grand Rapids, Michigan, – As most businesses prepare to make significant changes to the way they communicate with employees about their 401(k) plans, a partner with Plante Moran Financial Advisors says that benchmarking surveys are key to ensuring compliance with the new regulations.

New Department of Labor rules on 401(k) fee disclosures are slated to go into effect for most businesses in 2012. Among other things, they will require plan sponsors – who are most often employers – to disclose the fees that participants pay to brokers, investment advisors, third-party administrators and other service providers of qualified retirement plans and determine if those fees are “reasonable.”

Dori J. Drayton, a partner with PMFA, calls the changes a “very important step in the right direction,” but notes that mid- and small-sized employers face some extra challenges complying with fiduciary requirements of the new rules related to evaluating fees.

“There are a lot of different service providers who administer 401(k) plans, and they can all be paid in very different ways,” Drayton explained. “It has been difficult if not impossible to understand what fees are related to the services provided.

“The Department of Labor is mandating more transparency when it comes to fees, so that participants as well as the plan sponsor can understand what the fees are. In addition to telling employees what fees they are paying, employers must also exercise their fiduciary duties and evaluate the reasonableness of these fees. This places an extra responsibility on companies.”

The new rules, known formally as ERISA Section 408(b)(2), cover defined contribution and defined benefit plans, but not SEPs, IRAs, SIMPLEs, HSAs or similar plans. Providers will be required to disclose in writing:

  • The types of services provided and fees they “reasonably expect” for all contracts more than $1,000, including both direct and indirect compensation
  • Any conflicts of interest
  • Plan investments and investment options
  • Fiduciary services provided

Employees with 401(k) accounts will start to receive annual and quarterly disclosure statements with “much more comprehensive information,” Drayton said. At that time, employers must evaluate if the disclosures meet the new DOL requirements and whether or not the fees being charged are reasonable.”

“It’s important for companies to be on the front end of this requirement,” Drayton said. “The burden is on companies to determine what qualifies as reasonable in exchange for the services provided. Mid-sized and smaller companies may not have the internal resources to make that determination on their own. A benchmarking survey may be the most cost-effective way for plan sponsors to ensure they are meeting their fiduciary duties.”

Drayton noted that a comprehensive benchmarking survey will analyze a number of issues, such as:

  • Number of participants
  • Plan assets
  • Investment lineup
  • Investment committee
  • Relative plan complexity
  • Participant success measures
  • Use of automatic enrollment
  • Use of investment advisor and what services are offered
  • Employer match
  • Fees, including commissions, investment fees, finders’ fees, service provider fees, record keeper fees and others

“While the new disclosure requirements should be very valuable to companies and participants, they also highlight the fiduciary responsibility of monitoring and determining if fees are reasonable,” Drayton said. “Most companies won’t be able to determine this without external assistance and utilizing a benchmarking service
such as what PMFA provides.”

About Plante Moran Financial Advisors

With more than $7 billion of assets under management, Plante Moran Financial Advisors is one of the nation's largest independent registered investment advisors according to Financial Advisor magazine's 2011 RIA rankings. Plante Moran Financial Advisors provides comprehensive institutional investment consulting services to qualified and non-qualified retirement plans, foundations, endowments and other for- and not-for-profit accounts. PMFA also serves as a trusted advisor to high net worth individuals, family business owners, helping them build, manage and preserve their wealth. Its integrated affiliate services include investment consulting, financial planning, trust, insurance consulting, estate planning, business succession and tax planning. Plante Moran Financial Advisors is an affiliated entity to Plante Moran, the nation's 12th largest certified public accounting and business advisory firm, providing clients with financial, human capital, operations, strategy, technology, and family wealth management services. For more information, visit

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