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Coming in six months: A focus on 401(k) fees

Plan Sponsors need to make sure they dont fall for the fee trap when DOL-require plan disclosure of all service provider fees begins next April.

By Chris Carosa | Updated on October 12, 2011

April 1, 2012 looms as a date that may live in infamy for some 401(k) service providers. That’s when the DOL’s new 408(b)(2) regulation takes effect. This regulation requires all plan service providers to disclose their compensation to 401(k) plan sponsors. Service providers include anyone acting as a fiduciary, registered investment advisers, brokers, recordkeepers, third party administrators and consultants. But that’s not the surprise.

What 401(k) plan sponsors might find shocking will appear in the compensation section of the service provider disclosure (services and a declaration of fiduciary status must also be disclosed). Compensation is defined as anything received directly and indirectly. Indirect compensation can include cash or non-cash items the service provider receives as a result of providing a service to the plan. Most plan sponsors will already know the amount of direct compensation. This indirect compensation may startle them.

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