Sarah Gronvold

Now that the DOL has mandated the disclosure of 401(k) fees and expenses, plan fiduciaries are faced with one of several scenarios. This article guides plan fiduciaries to their next “action” step based on the current status of the 401(k) retirement plan fee disclosures. Plan fiduciaries have an obligation to take action if their current Plan Provider has not produced the required data and reported it to plan participants per the guidelines set forth in the new regulations. As always, the buck stops with the fiduciary so even though it is incumbent upon the Provider to follow the new regulations, it is the fiduciary who must oversee the reporting to insure that all requirements are being met.

Plan Fiduciaries have an on-going responsibility to assess the "reasonableness" of 401(k) fees and expenses. New DOL fee disclosure laws taking effect this summer will shed new light on participant costs which could result in some disgruntled employees. Plan sponsors can prevent a "revolt" by conducting a review of plan fees and expenses to insure that expenses charged against participant accounts are fair and reasonable for the Provider services being rendered. An investment analysis is also important in order to establish that fund performance justifies the fees (which can significantly reduce a participant’s account balance over time).

Plan sponsors, Trustees and Fiduciaries should not underestimate the extent to which plan fees can impact participant accounts. Media sources have picked up on this and started reporting on 401(k) “gone bad” which is fueling participant frustration. Later this summer, DOL fee disclosure regulations take effect which will highlight fees even more. The result of increased media attention is an increasingly savvy employee base that has been emboldened to ask more questions and demand more information from plan sponsors. The recent rash of 401(k) class action lawsuits against plan sponsors, large and small, is evidence that plan participants are watching more closely and that plan sponsors better be fulfilling their fiduciary obligation to act in the best interest of plan participants at all times.

There are several retirement plan-related/401(k) variables that should be reviewed regularly to avoid potential problems and breaches of fiduciary duty. It is important for plan sponsors to take a close look at issues related to their Financial Advisor or lack thereof, plan expenses, and ERISA, Fiduciary and IRS compliance - small errors and oversights can lead to big problems!

The DOL now says it will hold 401k plan sponsors liable even if it is their service providers who fail to comply with new Fee Disclosure regulations. Many Plan Sponsors underestimate the risk associated with non-compliance or, at a minimum, the potential liability that could result from a failure to fulfill Fuduciary obligations as they relate to participant interests.

Complacency is not an option when it comes to a 401(k) plan sponsor's Fiduciary obligation to act in the best interest of participants, particularly in light of the new DOL Fee Disclosure regulations taking effect later this year. This article explores the 10 major misconconceptions held by plan sponsors when it comes to their Fiduciary role.

This article by Ary Rosenbaum, Esq. helps navigate the often confusing landscape of "Fiduciary status", and the varying layers of protections offered by each respective option as it relates to 401(k) retirement plans. Often times, a plan sponsors may believe they are getting more protection than is actually the case. When it comes to the fiduciary role that 401(k) providers advertise, it is important for sponsors to understand what they are really getting and make sure that the provider explicitly accepts that role in the contract.

New research shows that the negative impact of fees on investment returns and the accumulation of assets is significant. Retirement Plan sponsors need to be aware of the erosion of value to their plan that can occur when fees and expenses are factored into the equation. These costs, most of which are related to “hidden” expenses buried in the plan’s investment options, are often charged against participant accounts. The impact of these fees is detrimental to the long-term accumulation of wealth and substantially reduces participant account values at the time of retirement. Well-intentioned plan sponsors may not understand the extent to which these buried fees undermine the objectives of sponsoring a retirement plan.

Unfortunately, in life we often have to learn the hard way. Though we may know the potential consequences of an action (or non-action), we trick ourselves into thinking that we are immune from such misfortune and choose to bury our heads in the sand. The same is true of Plan Sponsors who may skirt their fiduciary obligation to understand their plan and adhere to the strict regulatory agencies overseeing 401(k) retirement plans. This article explores the “it won’t happen to me” mentality that may have significant ramifications down the road – especially with small retirement plans where the plan sponsor may assume that he is flying under the radar … until he is not.

Retirement plan sponsors may not understand the extent to which employee expenses can erode future savings. As a fiduciary and plan sponsor, the primary “duty” is to ensure that the 401(k) plan is operating in the best interests of its participants. This means that the sponsor must know and understand all of the fees and expenses related to the retirement plan, especially those that directly impact participant accounts. Typically, these are the “buried” investment fees that are charged against assets (and therefore, participant accounts). These expenses are the “bread and butter” of non-fee-for-service providers who depend on “commissions” (which come in a variety of forms – 12b-1, revenue sharing etc.) as their primary source of income related to the operation of the retirement plan. The questions are 1) do participants know the extent to which they are ”footing the bill”? 2) do plan sponsors/fiduciaries understand the long-term impact of this "commission-based" arrangement on participant accounts.

Plan sponsors may feel an added burden and responsibility in light of new Department of Labor Fee Disclosure regulations that will take affect in 2012. The dual role of fiduciary and plan sponsor can complicate matters and increase the stakes, particularly for retirement plans with participant directed investment accounts. In addition to disclosure, plan sponsors have to contend with the ever-present ERISA compliance requirements. This article is a "guide" to help navigate the potentially rocky landscape ahead.