Employee Benefits

Fee transparency in retirement plans, particularly participant directed plans such as 401(k) and 403(b) plans, has been the subject of heated debate for the past several years.  The Department of Labor recently issued several sets of regulations designed to facilitate fee transparency by requiring various forms of disclosure by service providers and plan administrators.  The most recent of these regulations was issued on Oct. 14, 2010, and requires plan administrators to disclose information about plan fees, expenses and investment options to participants and beneficiaries in 401(k), 403(b) and other types of defined contribution plans if investments are participant-directed.  These regulations are effective for plan years beginning on or after Nov. 1, 2011 (Jan. 1, 2012, for calendar year plans).

Section 404(a) of ERISA requires plan administrators and other fiduciaries to discharge their duties prudently and solely in the interest of plan participants and beneficiaries.  The investment of plan assets is a fiduciary act subject to these fiduciary standards.  The Oct. 14, 2010, final regulations are intended to assist plan administrators of 401(k) and 403(b) and other participant-directed individual account plans in satisfying this obligation by requiring that participants and beneficiaries be provided on a regular and periodic basis with sufficient information regarding fees, expenses and investment options to allow them to make informed decisions regarding the investment and management of their accounts.  These new disclosure rules apply regardless of whether the plan already meets the fiduciary standards set forth in Section 404(c) of ERISA.  Although the regulations apply only to retirement plans that are governed by the Employee Retirement Income Security Act of 1974 (ERISA), governmental and church plans will likely be affected by these new requirements as well, to the extent that the disclosure rules become standard or best practices in the industry.

Read the full article on new fee disclosure requirements for retirement plans.