Guest Advisor Duff Meyer Asks Employers: Do Your Employees Know What They Are Paying for Their Retirement Plan?
As we have previously reported, the Department of Labor is taking important steps in the fight against excessive fees in the retirement plan space. Some service providers in the retirement plan industry are opposed to these regulations, claiming they are unnecessarily burdensome. The opposition of the 408(b)(2) regulation that was scheduled to become effective on July 16, 2011 has now been pushed back to an effective date of January 1, 2012. What does this new regulation mean to you as an employer offering retirement plan benefits to your employees?
What is 408(b)(2)?
408(b)(2) requires retirement plan service providers to disclose comprehensive information about their fees and potential conflicts of interest to you, the plan sponsor. This sounds like a good idea, right? And it seems relatively simple. Service providers must disclose to their clients how much is being received in fees and tell them if they have any conflicts of interest.
As you can imagine, service providers cried wolf saying the Department of Labor did not give them enough time to meet the regulation. Enough time? How much time does it take to take to let plan sponsors know what fees they are paying? The department of labor responded by issuing a statement that said in effect that they recognize service providers may need additional time for compliance.
“We want employers and workers to benefit from the increased transparency provided by these rules as soon as possible,” said Phyllis C. Borzi, assistant labor secretary for employee benefits security. “But we also appreciate that service providers may need more time for compliance efforts, because they have not yet seen a final Employee Retirement Income Security Act Section 408(b)(2) regulation. This action will provide that plan fiduciaries have all required information from service providers before they must disclose information to their workers, ensuring that workers receive accurate information about their retirement plan and investment costs.”