Are you in charge of employee benefits? Are you feeling more confused than they are when it comes to 401k fees? Trust me, you’re not the only one! Do you know if you’re a plan sponsor?
In February of 2012, congress passed their final ruling on fee disclosure for qualified retirement plans. The intention was to show fee transparency to a plan sponsor, and to make the “hidden” or hard to find 401K fees more clear. By now all plan sponsors have seen at least one 408(B)(2) notice come across their desk, and many are still not very clear on what they are paying and to whom. Receiving these notices was only the beginning; once the plan sponsor received these disclosures they were handed the responsibility of determining whether or not the fees they are paying for their service providers are reasonable.
Well, then, how does one determine what is reasonable? And what is the penalty imposed by the department of labor for failing to determine if your fees are reasonable? YIKES!
If a plan sponsor fails to do any of the following:
a) Evaluate the disclosures
b) To identify unreasonable compensation in a disclosure
c) To take the required actions
Then, the plan sponsor will be liable for having participated in a prohibited transaction for which the penalties and fines can be significant and for which the plan sponsor can be held personally liable.
The best way to determine if your plan is being charged reasonable fees is by doing a request for proposal. Look at what the current marketplace is offering for similar services. Another way plan sponsors have been satisfying their 408(B)(2) obligations is by having an independent third party perform a plan benchmarking versus similar plans in the company’s peer group. (Hey, we have people that can help you!)
Fee disclosure has now been legislated and is here to stay. It has caused some vendors to completely exit the industry. Plan Sponsors should be aware of these rules and know the penalties that can be imposed for not following through with measuring the reasonableness of their plan vendor fees.
Yeah, we get it. It’s a lot to understand especially if Benefits are not your specialty. But, no worries, because HR Resolutions can help you. Call 717-652-5187 to discuss your concerns. We can get you help to compare prices and determine if your fees are reasonable!
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