Understanding Fee Disclosure Regulations
Retirement plan fees can be complicated to understand. With the new legislation around fee disclosure in recent years, you are dealing with tough questions. With the help of a financial professional and resources from The Principal – you can gain a better understanding of retirement plan fees and how they may measure up based on the services provided.
The Department of Labor (DOL) has released both final 408(b)(2) plan sponsor fee disclosure regulations and 404(a) participant disclosure regulations effective in 2012.
Statement of regulations
- Covered service providers, including financial professionals and third party administrators (TPAs) who work with retirement plans, now need to disclose to plan sponsor clients the fees they receive and the services they provide.
- Plan fiduciaries must now disclose certain plan, fee and investment-related information to participants and beneficiaries in participant-directed defined contribution plans that are subject to ERISA, such as 401(k) and 403(b) plans.
Resources for you
It's important for you and your plan participants to understand the value they are receiving from their or the employer's retirement plans. This includes plan fiduciaries reviewing the overall value of the services provided to assess whether the fees being paid are reasonable.
The Principal provides a variety of resources that can help you evaluate plan services and fees and communicate benefits to your plan participants.
The Fee Reasonableness Review Checklist (PDF) is a sample template that helps guide plan fiduciaries through the evaluation process.
Consider three variables when determining whether what you are paying is reasonable:
- What is being paid? It's up to the plan fiduciary to understand all the fee components - both direct and indirect - being paid for the retirement plan.
- What is being received in return? The plan fiduciary should also understand the breadth and depth of the services being received for the fees paid.
- What is the assessed value? The plan fiduciary should aim to strike a balance between overall cost and the services rendered through the plan.
The 408(b)(2) Disclosure Checklist (PDF) can help plan fiduciaries evaluate the reasonableness of fees related to the operation and management of a retirement plan.
The ERISA 404(a) Participant Disclosure Regulation Resource Center assists plan sponsors in complying with the new participant disclosure regulation and communicating changes to participants about the plan and fee information.
The Understanding Retirement Plan Fees Brochure (PDF) is available for plan sponsors to help educate participants on the fees associated with the company retirement plan.
Questions about fees
If you have questions about retirement plan fees or fee disclosure regulations, please contact your financial professional, third-party administrator (TPA) or local representative from The Principal.
While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal or its representatives are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.