Make 401(k) ‘hidden fees’ transparent! DOL's feedback on new SECURE 2.0 reporting rules
Employee Fiduciary, a small business retirement plan advisory, called on the DOL to make fees more transparent for plan participants, in response to a feedback request on its new SECURE 2.0 Reporting and Disclosure requirements.
Employee Fiduciary, a small business retirement plan advisory, called out the Department of Labor to make fees transparent in 401(k) plans, providing recommendations to improve overall participant fee awareness.
Employee Fiduciary is a provider of 401(k) recordkeeping and Third-Party Administration (TPA) services. They recently submitted a comment letter to the U.S. Department of Labor in response to the Request for Information regarding the SECURE 2.0 Reporting and Disclosure requirements. The letter was written by Employee Fiduciary’s President and CEO, Eric Droblyen, addressing several key areas of concern, the primary focus being the need for enhanced clarity and transparency for 401(k) fees presentation.
“In our letter, we suggested improvements to the annual fee disclosure that participants in participant-directed 401(k) plans must receive before their enrollment date and at least annually thereafter,” stated the Employee Fiduciary. “Our suggestions have three basic objectives – increase the transparency of hidden fees, make total fees easier to calculate and compare, and better warn participants about the cumulative effect of fees.”
Employee Fiduciary’s offered some recommendations and implementations:
- Introduce a model chart for expenses to standardize of plan-related data
- Provide a clearer understanding of true costs and make ‘hidden fees’ transparent
- Shift the focus from annual fees to a long term view of how compounding fees can impact retirement savings
Related: SECURE 2.0: DOL seeks public comments on new or revised reporting requirements
Droblyen’s letter references a 2021 study by the GAO, which found that nearly four in 10 401(k) plan participants find difficulty deciphering the fee information presented in today’s disclosures. Employee Fiduciary’s letter further emphasized the importance of a transformative change, ensuring each participant possesses the knowhow to make informed savings decisions.
“We firmly believe in 401(k) fee transparency and the imperative need for participants to clearly understand the implications of these fees. This letter is our commitment to championing a change that benefits participants nationwide,” said Droblyen.