408(b)(2) Fee Disclosure

[rcline46]

I have read articles that say an employer (fiduciary) should get proposals from other firms or use a bench marking service to determine if the fees disclosed under 408(b)(2) from their current provider are 'reasonable'.

What I have not found is a discussion of how many proposals or how often the proposals should be obtained so t hat the fiduciary should feel they have done their due diligence and therefore be protected.

Is there any direct reference in the DOL promulgations as to quantity and timing? Is there any kind of concensus in the literature as to quantity and timing? Or is it being ignored.

Thanks all to your insights.

[four01kman]

I think prudence is this area, like many others, is appropriate. An annual, bi-annual, or tri-annual benchmarking of fees might be appropriate. I think it depends on the Plan Sponsor, the investments offered, and probably should be covered in the IPS, or similar document for non-investments. As for the number of "proposals", the answer well may be none, if appropriate benchmarking data can be obtained other than from proposals.

[Guest LouHarvey]

There are no regulatory requirements for employers (fiduciaries) to obtain proposals or benchmarks for fees. The requirement is for fiduciaries to use a prudent process to determine three things: 1) Each service is necessary, 2) the arrangement with the service provider is reasonable and 3) the cost of the service is reasonable. Fifuciaries may develop and defend a prudent process for making these determinations or may engage an independent expert to do so. For more information on this subject, visit www.ERISAFeeDisclosure.com.