Service Provider and 401(k) Fee Disclosure Rules: Impact Upon ERISA Plans
March 13, 2012
By: William J. Keenan, Jr.
Connecticut Bar Association - Labor & Employment Law Quarterly
The U.S. Department of Labor has issued separate rules for disclosing fees by service providers to plan sponsors, and for communicating fees to plan participants. The goals of the rules are increased transparency of fees, increased ability to perceive conflicts of interest, e.g., where service providers receive compensation through plan investments, and uniformity in fee reporting. Regulators have also suggested that the new regulations will result in reduced fees even though the regulations do not contain any mandates in this regard. Phyllis Borzi, the Assistant Secretary of Labor for the Employee Benefits Security Administration, has stated that “[T]he more transparency, the more people will be likely to reduce their fees. And the lower the fees, the better the return on investments.”
This article will discuss both sets of regulations. They are issued under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), so they are not directly applicable to governmental plans or church plans. Nevertheless, such plans may look to these rules as “best practices” and modify their disclosures on a voluntary basis. Furthermore, service providers might not distinguish between ERISA and non-ERISA plans in altering their disclosures.
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