Retirement Plan Fee Disclosure

January 17, 2007

Over the past year, Congress and government regulators have increasingly taken an interest in assessing fee disclosure issues, such as what fee information is required and how the information is disclosed. A primary concern expressed by some lawmakers is that plan participants may not have sufficient information about the fees and expenses they are being charged. The Congressional examination was jump-started when GAO issued a report on fee disclosure on 401(k) plans that was requested by House Education & Labor Committee Chairman George Miller. Read more about the Retirement Plan Fee Disclosure.

Defined Contribution Plan Fee Transparency Act of 2007

Attention shifted to all tax-preferred, participant-directed, retirement plans – including 457 plans – when Rep. Neal (D-MA) introduced his Defined Contribution Plan Fee Transparency Act of 2007, HR 3765, on Oct. 4, 2007. The Neal bill would require employers to provide employees with two separate disclosures regarding plan investment and fees – at enrollment and annually. It also would require plan service providers to give fee information to plan administrators in advance of a contract, including estimates of total fees and a detailed list of services under the contract. The bill would impose these new disclosure requirements on all tax-preferred, participant-directed defined contribution plans, including 401(k) plans, 403(b) plans and governmental 457(b) plans.

• To view H.R. 3765 visit: http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.03765:
• To view the House Committee on Education and Labor Full Hearing on H.R. 3185, 401(k) Fair Disclosure for Retirement Security Act of 2007 visit: http://edworkforce.house.gov/hearings/fc100407.shtml

The Ways and Means Committee held the most comprehensive hearing to date on fee disclosure on Oct. 30, 2007. Chaired by Rep. Charles Rangel (D-NY) it also is the committee that has jurisdiction over governmental 457 plans. NAGDCA testified that governmental plans have higher levels of disclosure and oversight than private-sector plans. They reported on a recent member survey that found that plan sponsors’ knowledge of fee arrangements was varied. NAGDCA stated that they did not believe additional requirements were necessary for public plans.

Defined Contribution Fee Disclosure Act of 2007

On December 13th, Senators Tom Harkin (D-IA) and Herb Kohl (D-WI) introduced S. 2473. This is the first Senate bill to address the retirement plan fee disclosure issues; it covers only ERISA plans and would not directly affect state and local government 457 plans. While Senators Harkin and Kohl began their drafting based on the 401(k) Fair Disclosure for Retirement Security Act of 2007 (H.R. 3185) from House Education and Labor Committee Chairman George Miller (D-MA), they made a significant number of modifications to address concerns raised by plans sponsors and service providers. For example, the bill does not mandate inclusion of an index fund in the investment menu and requires less detailed fee disclosure to both sponsors and participants than does the Miller bill. Early indications are that the Senate HELP and Finance committees would like to take a look at fee disclosure issues and may consider holding hearings in 2008. The Senate Committee on Aging held one hearing last year on the topic.

• To view press release – Chairman of Aging Committee Holds Hearing on Need for Disclosure, Announces Bill – visit: http://aging.senate.gov/record.cfm?id=287603

DoL Proposes Regulation on Service Provider Fee Disclosures

In mid-December the Department of Labor (DoL) released the second of three fee transparency projects it has been working on over the past year. The most recent project proposes guidance under ERISA Section 408(b)(2) addressing fee disclosure requirements between plan service providers and ERISA benefit plans. This guidance consists of two parts: (1) a proposed regulation, and; (2) a proposed class exemption for plan fiduciaries when plan service arrangements fail to comply with the requirements. This proposed regulation does not explicitly apply to governmental plans. Comments on both elements of the guidance are due by February 11, 2008. Proposed Regulation Relating To Service Provider Disclosures Under ERISA Section 408(b)(2)