However, there is a silver lining surrounding the valuable and critical benefits resulting from the disclosures.

Service Provider Disclosures:

One of the first benefits is that plan fiduciaries now have a more compact and precise tool to help determine the actual services provided by a vendor, and the reasonableness of the fees for such, to a plan. 

Since determining the reasonableness of the services and fees under a service provider arrangement has always been a requirement of the fiduciaries (to avoid a prohibited transaction), the disclosures should simplify what had been a complex process for most fiduciaries. For other fiduciaries, perhaps this will be the first time a formal determination of an arrangement's reasonableness has actually been made.

With the new disclosure, the determination process has been made easier for the plan fiduciaries, and can allow them to make more informed decisions.

The same benefit applies with respect to documenting the process  of determining of an arrangement's reasonableness. By having a disclosure describing and summarizing the services, fees, and the parties providing the services and receiving the fees, the fiduciaries' documentation process has been simplified. In addition, documenting the process could aid the plan sponsor/plan fiduciaries defend any legal claim that the services and fees were not reasonable.

Another benefit is that the disclosures allow fiduciaries to use more of an "apples-to-apples" comparison of one service provider's services and fees to another service provider's services and fees. Comparisons may be used to further justify staying with the current service provider, or to explore whether switching to a different provider might be better.

Yet another benefit is the disclosures allow fiduciaries to help identify whether any changes to the current arrangement should be explored and/or made. For instance, after reviewing the disclosures made about the investment alternatives in the required summary chart format, perhaps the plan fiduciaries may decide to add or modify the investment alternatives from which a participant may choose to invest his/her account balances.

Participant Fee Disclosures:

A benefit resulting from the participant fee disclosures is that participants may better understand  investment expenses and other important information, such as information related to investment alternatives. 

Being aware of fees and investment-related information could further result in helping participants make more informed decisions, such as deciding which investment alternatives are best for their situation, and perhaps even deciding if taking a loan from the plan is worth having to pay the annual loan fees that might apply. 

Another benefit with the disclosures is that much of the information will now be readily available, either in the disclosures itself, or accessible in a link or website referenced in the disclosures. 

An example illustrating the above benefits concerns information relating to the investment alternatives, for which, as mentioned earlier, the disclosures must provide in a summary chart format. Some of the required information in the chart includes the performance data and benchmarks (over a one-year, five-year, and 10-year period, or life of the alternative, if shorter) for each of the investment alternatives.

By having a chart summarizing the performance and benchmarks of each investment alternative, participants can compare the investment alternatives and make more informed investment decisions. Can you imagine if or how, without the chart, participants could quickly locate and compare the performance data and benchmarks for, say, 30 investment alternatives? 

Again, by having the investment alternative information in a summary chart format, the participants will be better able to make informed decisions.

Besides the benefits mentioned above, the disclosures could lead to discussions about the 401(k) plan between the plan sponsors and the participants.  Perhaps plan sponsors will be better able to re-affirm the benefits of a 401(k) plan, including the ability to better plan one's retirement by choosing investment alternatives that best meet a participant's situation.

I hope you agree the service provider disclosures, as well as the participant fee disclosures, contain a silver lining, benefitting plan sponsors, plan fiduciaries, and participants.