Not a Member?  Become One Today!

Most Retirement Plan Sponsors Unprepared for Fee Disclosure Rules

By SHRM Online staff  12/20/2011
Copyright Image Permissions

Updated 2/3/2012

DOL Extends Deadlines for Service Provider and Participant-Level Fee Disclosures by Additional 3 Months


The U.S. Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) published its long-awaited final rule, "Reasonable Contract or Arrangement Under Section 408(b)(2) – Fee Disclosure," in the Federal Register on Feb, 3, 2012. The final rule requires retirement plan service providers to disclose to plan sponsors the administrative and investment costs associated with their plans. It extends the effective date to July 1, 2012, for new and existing contracts or arrangements between service providers and plans covered under the Employee Retirement Income Security Act (ERISA).


Another set of required fee disclosures, from plan sponsors to 401(k) plan participants (participant-level fee disclosures), is set to take effect 60 days after the service provider fee disclosure deadline. Due to the extension of the effective date of the final rule, plan administrators for calendar year plans now must make the initial annual disclosure of "plan-level" and "investment-level" information (including associated fees and expenses) to participants no later than Aug. 30, 2012, and the first quarterly statement (for fees incurred July through September) must be furnished no later than Nov. 14, 2012.


To learn more, see the SHRM Online article "DOL Final Rule Extends Deadlines for Service Provider and Participant-Level Fee Disclosures by 3 Months."

Effective July 1, 2012, a U.S. Department of Labor (DOL) retirement plan service provider fee disclosure rule will require all 401(k) retirement plan service providers to begin providing increased fee disclosure to sponsors and plan fiduciaries. Additionally, on Aug. 30, 2012, a DOL participant fee disclosure rule will go into effect, requiring plan sponsors to provide quarterly fee disclosure reports to plan participants.

However, as many as 61 percent of American companies do not feel prepared to respond to these new fee disclosure regulations, according to a survey by consultancy McGladrey & Pullen LLP and retirement plan service provider Verisight. Furthermore, executives believe that only 3 percent of employees fully understand the cost of their retirement plan.

The Verisight and McGladrey 2011/2012 Compensation, Retirement and Benefits Trends Survey, conducted September-October 2011, polled more than 850 organizations drawn from a national sample. The majority of participants were mid-sized, private and nonprofit companies reflecting a range of industries.

Fiduciary Confusion

The survey revealed that confusion exists around fiduciary standards. While 87 percent of employers use an external or third-party investment advisor, a third (34 percent) of these respondents were unsure what their advisor's fiduciary responsibility meant and 27 percent said they work with advisors that are not fiduciaries.

More Matching Contributions

In 2012, cost control strategies will stay top of mind for middle market executives, according to the survey. However, only 6 percent of respondents were considering reducing or suspending 401(k) matching contributions.

Related Articles:

Sample Glossary of Investment-Related Terms for Disclosures to Retirement Plan Participants, SHRM Online Benefits Discipline, December 2011

Most Have Restored 401(k) Matching Contributions, SHRM Online Benefits Discipline, November 2011

Preparing for Service Provider Fee Disclosures, SHRM Online Benefits Discipline, September 2011

DOL to Re-Propose Controversial Fiduciary Rule, SHRM Online Benefits Discipline, September 2011

DOL Issues Policy on Electronic Disclosure of Participants' 401(k) Fees, SHRM Online Benefits Discipline, September 2011

Fiduciary Obligations: The Devil's in the Details, SHRM Online Benefits Discipline, June 2011

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Retirement Plans Resource Page

Sign up for SHRM’s free Compensation & Benefits e-newsletter

Copyright Image Permissions


Swipe for more!