Fall 2011 issue of Horizons

Features

New Retirement Plan Fee Disclosures

By Wayne Isaacs, CPA, JD, CEBS

The Department of Labor issued “interim final regulations” in 2010 requiring covered service providers of defined benefit, defined contribution (401(k), profit sharing, employee stock ownership, money purchase pension) and ERISA 403(b) plans to disclose certain plan information to fiduciaries. The disclosures will enable fiduciaries to assess the reasonableness of their plan fees and identify any actual or potential conflicts of interest. The regulations were originally supposed to become effective July 16, 2011, but that date was extended first to January 1, 2012 and then to April 1, 2012. The regulations identify the requirements that must be followed in order for a plan to avoid a prohibited transaction. The regulations are complicated, and covered service providers are trying to interpret them. The Department of Labor did not publish a standard template for the covered service providers to use to disclose the required information.

Thus a retirement plan fiduciary who is responsible for the management or administration of multiple plans may receive different versions of the disclosures based on that covered service provider’s interpretation of the regulations. This article will provide you with a high level overview of the regulations. Fees The first step is to identify the various types of fees or compensation that a covered service provider may receive from a plan. There are two types of compensation that must be defined to fully understand the impact of the regulations. The first one is “direct compensation,” which is compensation received directly from the plan for services rendered to the plan. The second term is “indirect compensation,” which is compensation received from any source other than from the plan, plan sponsor or an affiliate of a covered service provider. This compensation is netted against the value of the assets.

Raise Your Expectations

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