CPA & Business Advisory Blog

The Impending Wave of 401(k) Plan Fee Disclosures

This spring, companies who sponsor 401(k) plans can expect their inbox to be full of new information.  The Department of Labor’s plan fee disclosure rules are set to take effect April 1, 2012.  Service providers of 401(k) plans will then be required to provide employers with figures for the direct and indirect compensation they receive to service plans.  They will now need to disclose recordkeeping fees separately from all other fee disclosures. They also must detail indirect compensation, such as revenue sharing and compensation to advisors, attorneys and trusts. All of these come out of plan assets.

This follows a similar requirement by the Internal Revenue Service in 2009 to enhance disclosures related to plan expenses on Schedule C of the Form 5500.  Anyone who is considered to be a fiduciary should plan to spend time this year reviewing the fee disclosures and consider options.  Participants in 401(k) plans will also receive this information and will be able to get more detailed information on fees charged to their account.  Fiduciaries may end up being personally liable to participants for breaching their fiduciary responsibility if fees are determined to be too high.  Participants may not even be aware that fees are charged to their accounts, so that news plus all the detail to come might come as a shock to some.  This will be a good opportunity to educate participants on investment options and explain that lowest cost options might not best meet their retirement objectives. 

Overall, the new fee disclosures are coming soon, but plan sponsors can use this as an opportunity to evaluate their plan and educate participants as well.   

Have questions about how to evaluate the new fee disclosures? Post a comment below or contact us at 440-449-6800.

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