401(k) Fee Disclosure RegulationsDefined a NEW Fiduciary Duty –       Are You Compliant?                 Presented by     ...
You May be Unaware of YourMost Significant Fiduciary Duty              The Department of Labor expects              more f...
Ignorance is NOT Bliss  The preamble to the final regulations indicates that     the DOL does not consider ignorance of th...
What is expected of Plan Sponsors? Upon receipt of the disclosure documents from your   covered service providers (vendors...
“…if a plan sponsor fails to engage in a prudent process to  evaluate disclosures provided by a service provider, or fails...
Is the DOL Planning to Enforce                Compliance? In preparation for the release of the regulations, the  DOL adde...
Are You Likely to be Audited?   At the end of 2010, the Internal Revenue Service’s employer plan division disclosed its li...
First Class Action Suit over 401(k)   Fees Results in $35 Million in FinesManufacturer ABB, Inc. was fined for:1. Failing ...
Do You Have Time to Research                 What is “Reasonable”?                   Who will do the homework on what is t...
Should You Hire An                    Independent Adviser?   “While the evaluation of the reasonableness ofcompensation ma...
How Can Align Financial Services             Help?Our Fee Disclosure Assistance Programs can helpyou:1. Understand revenue...
How Can Align Financial Services                 Help?Our Fee Disclosure Assistance Programs can help you:4.   Perform an ...
Take the Next Step!To receive information about our well-priced plan  assessment packages, please call or email us. We are...
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investme...
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Making Sense of Fee Disclosure Regulations

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How to make sense of the recent Department of Labor Fee Disclosure Regulations as they pertain to 401(k) plan sponsors.

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Making Sense of Fee Disclosure Regulations

  1. 1. 401(k) Fee Disclosure RegulationsDefined a NEW Fiduciary Duty – Are You Compliant? Presented by Janel M. Cross, President Align Financial Services Group
  2. 2. You May be Unaware of YourMost Significant Fiduciary Duty The Department of Labor expects more from you than just collecting and distributing disclosures. You are charged with assessing the “reasonableness” of your plan’s fees.
  3. 3. Ignorance is NOT Bliss The preamble to the final regulations indicates that the DOL does not consider ignorance of these disclosure rules to be a basis for relief from ERISA’s prohibited transaction rules.Source: Reish, Fred et al. “ERISA Service Provider Disclosures:What Plan Sponsors Need to Do Now” Client Bulletin, July2012. www.drinkerbiddle.com
  4. 4. What is expected of Plan Sponsors? Upon receipt of the disclosure documents from your covered service providers (vendors), you must:1. Ensure that all disclosures received are complete according to the requirements of section 408(b)2.2. Determine whether your fees are “reasonable” relative to services provided.3. Identify and address any potential conflicts of interest.
  5. 5. “…if a plan sponsor fails to engage in a prudent process to evaluate disclosures provided by a service provider, or fails to identify required disclosures that are missing or deficient and take affirmative action, it will have engaged in a breach of fiduciary duty and, possibly, a prohibited transaction.”Source: Reish, Fred et al. “ERISA Service Provider Disclosures:What Plan Sponsors Need to Do Now” Client Bulletin, July 2012.www.drinkerbiddle.com
  6. 6. Is the DOL Planning to Enforce Compliance? In preparation for the release of the regulations, the DOL added 997 employees in 2009. 70% of those new hires were added to the enforcement division.Source: “Retirement Planners Beware: DOL, IRS Beefing UpEnforcement.” Waddell, Melanie. Advisor One. 06/14/2011
  7. 7. Are You Likely to be Audited? At the end of 2010, the Internal Revenue Service’s employer plan division disclosed its list of “plan sponsoraudit targets” – small business owners; 403(b) plans; and U.S. companies owned by foreign entities.Source: “Retirement Planners Beware: DOL, IRS Beefing UpEnforcement.” Waddell, Melanie. Advisor One. 06/14/2011
  8. 8. First Class Action Suit over 401(k) Fees Results in $35 Million in FinesManufacturer ABB, Inc. was fined for:1. Failing to monitor fees and revenue-sharing payments to the plan’s trust company2. Failing to negotiate rebates to offset or reduce costs to plan participants3. Replacing an actively balanced fund with the trust company’s target date fund which generated more revenue sharing for the trust companySource: 11 April, 2012. “Company Hit for $35 Million in 401(k)Fee Case.” Mamorsky, Jeff. CFO.com
  9. 9. Do You Have Time to Research What is “Reasonable”? Who will do the homework on what is truly “reasonable” in order to demonstrate fiduciary responsibility? 45% of small business respondents indicated that 4.00% was a reasonable fee.1 The average all-in 401(k) fee paid by small plans is between 0.99% and 1.83%.21. Study conducted by ShareBuilder 401(k), cited in “401(k) Fee Disclosure Leaves Small U.S. Firms with Questions.” 11 Sept, 2012. NBCNews.com2. Study conducted by Deloitte and the Investment Co. Institute, cited in “401(k) Fee Disclosure Leaves Small U.S. Firms with Questions.” 11 Sept, 2012. NBCNews.com
  10. 10. Should You Hire An Independent Adviser? “While the evaluation of the reasonableness ofcompensation may be undertaken without assistance, courts tend to agree that it is a “best practice” towork with a knowledgeable and independent adviser to assist in this process”Source: Reish, Fred et al. “ERISA Service Provider Disclosures:What Plan Sponsors Need to Do Now” Client Bulletin, July 2012.www.drinkerbiddle.com
  11. 11. How Can Align Financial Services Help?Our Fee Disclosure Assistance Programs can helpyou:1. Understand revenue-sharing within your plan.2. Review your disclosures for completeness.3. Identify potential conflicts of interest.
  12. 12. How Can Align Financial Services Help?Our Fee Disclosure Assistance Programs can help you:4. Perform an Independent Comparative Fee Analysis to Assess “Reasonableness” of your plan’s fees.5. Demonstrate to enforcement agencies that you have been prudent in your attempt to gather accurate information about the "reasonableness" of your plans fees.
  13. 13. Take the Next Step!To receive information about our well-priced plan assessment packages, please call or email us. We are also happy to answer anyquestions you may have about this important development. 717.207.9230 janel@alignfsg.com www.alignfsg.com
  14. 14. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Advisor www.alignfsg.com

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