Participant Fee Disclosures

[austin3515]

So we're trying to figure out how to comply with the new participant fee disclosure regs, and what we keep coming back to is this: What are the fund companies doing? It seems that the effort between us as the TPA and the fund company needs to be somewhat coordinated.

Has anyone heard from Hancock, American Funds, Great West, ING, etc. etc. what they are doing, so that we can fill in the gaps? Or are they still trying to figure it out?

Thanks,

[Bird]

I'm operating on the premise that the platforms will provide the necessary disclosures. I've specifically talked to AF and reviewed their correspondence and believe that what they're doing will be ok.

We have some self-directed brokerage account plans and are trying to push the burden off to the brokers; I think the key there is "just" making sure the brokerage account fees themselves are disclosed. The problem cases will be non-platforms that are limited in their selections - e.g. I have an old grandfathered AF plan with old-fashioned retail accounts in A shares. Someone could probably cobble together the charts and whatnot from info that is available but I don't want it to be me, even if I get paid for it.

[DMcGovern]

Have you seen the DOL's sample fee disclosure form for a 401(k) plan? It's eleven pages long! You can check it out at www.dol.gov/ebsa/pdf/401kfefm.pdf.

Even if a plan sponsor goes through all the steps to obtain all the information, put it in this form and properly provide it to all the right employees, I seriously doubt if the employees will read it.

I'm all for disclosure and keeping clients/participants educated about their retirement plan(s), but this is so cumbersome. As a TPA, we don't have access to all of the information that the plan sponsor is supposed to be providing to allow us to prepare the notices for them. How many plan sponsors (small companies) do you think really are aware - and take it seriously - that they are responsible for the annual/quarterly disclosures? And how many want to take the time out of their already busy schedules to go through all of this? It's such an administrative burden for these small business owners who were looking for a basic "plug and play" kind of arrangement.

[austin3515]

The way I see it, some of the annual disclosures will be covered by the fund companies, but the rest will fall on us. For example, what is the fee for a loan/distribution? The fund company/recordkeepers don't know what our fees are, so we need to disclose them. I can't see how some of these things could be incorporated into an Americahn Funds statement.

Also, bokerage accounts are exempted from an awful lot of these rules.

Also, I know sungard says they spoke to the DOL, and the DOL is saying all ELIGIBLES need the annual disclosures regardless of whether or not they have a balance. But I think a reasonable interpretation of the rules is that you are not eligible to direct investments if you do not have a balance in the Plan. Does anyone have any thoughts on that?

[Bird]

I'm all for disclosure and keeping clients/participants educated about their retirement plan(s), but this is so cumbersome. As a TPA, we don't have access to all of the information that the plan sponsor is supposed to be providing to allow us to prepare the notices for them. How many plan sponsors (small companies) do you think really are aware - and take it seriously - that they are responsible for the annual/quarterly disclosures? And how many want to take the time out of their already busy schedules to go through all of this? It's such an administrative burden for these small business owners who were looking for a basic "plug and play" kind of arrangement.

I think we have a responsibility to say "you can't do this anymore - go on a platform or pay us or someone else exorbitant amounts to comply, or take your chances but sign this acknowledgement that I warned you."

Make lemonade - I'm hoping to use it as a hammer to get some of those cobbled-together messes under control.

[DMcGovern]

Also, I know sungard says they spoke to the DOL, and the DOL is saying all ELIGIBLES need the annual disclosures regardless of whether or not they have a balance. But I think a reasonable interpretation of the rules is that you are not eligible to direct investments if you do not have a balance in the Plan. Does anyone have any thoughts on that?

Everything I have read on this, including legal reviews/opinions state that the disclosures have to go to employees that are eligible, but have not chosen to participate. I like your interpretation of it, but not sure it would hold up under audit.

[SMB]

Austin3515,

Can you - or anyone else - expound a bit more on the fact that "brokerage accounts are exempt from an awful lot of these rules"? First I've heard mention of this, although it would be "music to my ears" if at all the case!

Thanks!

[austin3515]

http://www.relius.net/news/TechnicalUpdates.aspx

I'm running out the door, but above is a link to Sungard's technical update pages. If you look at the participant fee disclosure write-ups (there's like 8 of them in there) you'll see that there is mention that many of the disclosures only apply to Desgnated Investment Alternatives. Honestly, I don't remember which one it was in, but if you do searches for "brokerage windows" you'll find it pretty efficiently.

[K2retire]

Great-West says theirs is done, although I haven't had time to look at it yet.

[Bird]

True, brokerage accounts don't have do a lot of the comparison stuff (chart, etc.). They have to disclose the fees associated with the brokerage account and we're trying to get the brokers to do that (snicker).

I agree that eligibles must get the notices/info.

Austin, the disclosures don't have to be all in the same place and I'd be surprised if your SPDs don't include loan fees.

[austin3515]

Bird -

We ahve until been hesitant about putting them in the SPD on our software because that means every time we change fees we need to go into our document software to change them. I've now created an offshoot to our Access database, where I can generate an appendix inside the same system that is used to track what our fees are, who pays them (client or participant), etc.

As far as the fees in the brokerage accounts go, it seems to me that it's hopeless to even try to attempt this. We have plans that have accounts with 7 or 8 different broekrage accounts (we hate them bt they exist). Hopefully people like you wll convince them to update their statements, but I suspect that will be difficult even for them, especially when the same platform is used for a small number of retirement accounts, but a huge number of retail accounts...

But I am comforted by the fact that there is no penalty for non-compliance. Proof of damages is required in court (according to Sungard) and with small plans (most commonly invested in brokerage accounts) that is exceedingly unlikely. So we're going to do the absolute best that we can, but I just can't see an efficient way to track this. I don;t think the financial advisors even know the all the possible fees within an account.

And brokerage accounts are a vital tool in the small plan market, and I'm not going to look at this as a death-blow to the option.