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401k Fee Disclosure FAQs

Especially with new regulations in place, the specifics of 401k fee disclosures can be difficult to navigate.  Below are 10 common questions and concerns employers have regarding 401k fee disclosures so that you can be aware of the fees you are being charged in conjunction with your 401k plan.

1.  What are the required disclosures?

These 401k fees are simply referring to what your employees are paying to hold their 401k plan.  It is your fiduciary responsibility to provide participant-level disclosures, but most plan administrators are leaning on their 401k vendors to prepare these disclosures.

2. What if disclosures have gone out to my plan participants already?

If 401k fee disclosures have already gone out without affirmative approval from sponsors, you should request a copy of the disclosures and review them anyway.  While you may not be able to change 401k fees, you can be prepared to field participant questions and feedback.

3.  Can I count on disclosures provided by my vendors?

No.  It is a plan sponsor’s responsibility to provide 401k fee disclosures according to the Employee Retirement Income Security Act (ERISA), so it is important to review those disclosures provided by your vendor.  The regulations outlined by the Department of Labor rely on good faith disclosure reporting.   While these disclosures are made in good faith they may be overly vague, so it may be a good idea to request supplementary disclosures from your vendor to protect yourself from fiduciary liability.

4.  Is it likely that plan participants with have questions and concerns about their 401k fee disclosures?

This all depends.  Some plans are so complex, participants may not be curious enough to inquire about the details.  At the same time, there may be participants who want you to explain those complexities.  That being said, be sure to review all disclosures so that you can answer questions.  Some questions might include:  “Why are there administration fees, I thought investing in my 401k was free?” or “What are ‘revenue sharing payments’?”

5.  Who must receive these new 401k fee disclosures?

The new 401k fee disclosures must be provided to all eligible employees, which includes new hires as well as those eligible but not necessarily participating currently.

6.   Is it required that I provide 401k fee disclosure information for all investment options in my plan?

Plan sponsors need to provide full Department of Labor fee disclosures for their designated investment alternatives (DIAs), but not all of the investment options are DIAs.  If the 401k plan provides a ‘brokerage window’ there are separate reporting requirements outlined in the Field Assitance Bulletin 2012-03.  Also, if a plan offers company stock, it is a good idea to check the 401k fee disclosure requirements and make yourself aware of the benchmark used.

7.  What do I do if the “benchmark” for an investment option vendors use for participants does not match that of the plan’s investment guidelines?

Be sure to check over the guidelines against what your participants will receive so that you are prepared to explain them to participants.

8.   What should I do with the plan-sponsor-level disclosures that I have gotten from my 401k plan vendors?

Upon receiving the 401k fee disclosure from your vendors, the reasonableness of the disclosed fees should be discussed.  It is important to consider whether it is necessary to do a formal request for information or request for proposal to assess the 401k fees paid by the plan since in some cases it may not be necessary.

9.   Will new 401k fee disclosure regulations effect my other plan documents?

If you contracted with your vendor or service provider recently (i.e. in the last year or so) it may be a good idea to consider updating it so that the vendor agrees to provide you with the fee disclosures required.  Also, in order to see if any additional updates are required, review the plans investment guidelines.

10.   Are there other new 401k fee disclosure regulations that apply to quarterly participant account statements? 

Yes, the Department of Labor has made new disclosure requirements for quarterly statements and drafts of those new quarterly statements should be coming from vendors soon.  These new quarterly statements are required at the start of the third quarter, but no later than November 14, 2012.

These are just some of the questions employers may have regarding 401k fee disclosures and their fiduciary responsibility to their employees and participants.  That being said, all of your questions may not be answered so feel free to give us a call so that we can help you clarify your 401k fee disclosures, 212.695.7495.


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Arthur Grutt