408(b)(2) Fee Disclosure Regulation Update: A Road Map for Plan Sponsors

Caroline Kettering, CPA

As a plan sponsor, you probably dread sifting through mountains of papers in order to findlogo and understand your plan providers’ fees. The Department of Labor isn’t too thrilled about it, either. Two years after the original 408(b)(2) fee disclosure regulations were finalized, the Department of Labor has issued a long-anticipated proposed amendment concerning the format of these disclosures. The proposed amendment aims to provide a “road map” for plan sponsors to help you more easily identify fee information and, therefore, more effectively fulfill your fiduciary duties.The DOL has proposed that covered service providers supply a guide to help quickly and easily identify key information in their disclosures. Service providers would have to provide a specific locator that clearly identifies where to find the following information:

  • The description of services to be provided;
  • The statement concerning services to be provided as a fiduciary and/or as a registered investment adviser;
  • The description of: all direct and indirect compensation, any compensation that will be paid among related parties, compensation for termination of the contract or arrangement, as well as compensation for recordkeeping services;
  • The required investment disclosures for fiduciary services and recordkeeping and brokerage services, including annual operating expenses and ongoing expenses, or if applicable, total annual operating expenses.

It’s important to note that not all disclosures would require such a guide; only disclosures that are lengthy and/or that are presented in multiple documents. The DOL is seeking comments and suggestions regarding the proposed amendment, and welcomes comments for what the threshold should be for triggering the guide.

While some industry leaders debate whether or not this amendment goes far enough to provide clear, easy-to-access information, it is undoubtedly a helpful step to more thoroughly understand and analyze plan fees.

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