Fee Disclosures

[austin3515]

Under 408b2, changes to investment related disclosures must be made at least annually. Does the participant fee disclosure prepared cover those disclosures? I got the impression that legally, it is the other way around - that is, the annual disclosure obligation was required to facilitate the plan sponsor fulfilling it's 404a5 requirements. But as a practical matter, does the covered-service-providers preparation of the 404a5 disclosure cover this?

[Bird]

No I don't believe so. 404a5 tells participants what they are being charged; 408b2 tells fiduciaries what covered service providers are making. There's a difference.

[John Feldt ERPA CPC QPA]

The theory is that the plan fiduciary needs to receive the 408(b)(2) disclosure from the plan providers so they know what amounts to disclose to the participants on the 404(a)(5) disclosure. This assumes the plan fiduciaries know about this issue, wuilll review the fees you will receive from the plan for reasonableness, take those figures and generate such 404(a)(5) disclosure (ha ha).

In reality, in addition to the 408(b)(2) disclosure that you provide to the employer (generally your fee agreement for your services), you likely need to provide something formatted for the participants to be included with their enrollment packets (if the platform enrollment packets do not or cannot disclose each of your fees that might be paid from the plan). Then you annually provide that same participant notice to the employer and explain they should hand it out with the annual fee and fund information disclosure notice they are getting or will be getting from the investment platform, but if they already handed that platform notice out to the participants without your information, then they have not satisifed the DOL, so they have to hand it out again with your fee information included since the DOL does not allow your fee info to be handed out separately from the annual investment notice.

[Bird]

I prefer to think of them as unrelated. Yeah, if a CSP charges $100 to process a loan and keeps it, it's the same for either disclosure. But if you have a mutual fund with expenses of 1.50%, that's what is disclosed to the participants. If the broker-dealer gets 0.50% of that, that is what is disclosed to the fiduciary.