You’ve Received Fee Disclosures, Now What?

Darlene Finzer | August 23rd, 2012

It’s Your Turn to Disclose Fees to Participants

Did you suffer from sticker shock when you received the recent fee disclosures from your service providers? If so, you weren’t the only plan fiduciary to be surprised, even though it’s your job to know the ins and outs of your pension plan.

Now, by August 30, you have to disclose that fee information to your plan participants. How do you think they will react? It is possible they aren’t going to like the news. Worse yet, they may be confused as to why they are suddenly paying new fees when the reality is they have always paid them. Being upfront about plan costs, and plan benefits, can help you make it through this new disclosure requirement.

Do More Than You’re Required

According to a recent study by AARP, 71 percent of employees don’t think they pay any fees in their retirement plan. So the information you provide to the contrary needs further explanation. Don’t just share the required fee disclosures. If you do, you risk lowering employee morale and potentially plan participation. Take this opportunity to ensure your participants have adequate information on the costs and benefits of plan participation.

Know What to Disclose

After the initial disclosure date, the required participant fee disclosures must be provided on or before the date the participant first becomes eligible and at least annually thereafter. Disclosures must contain key information in three main categories:

  • General Plan Information. This is the basic rules of plan participation including who’s eligible to participate, participants’ rights under the plan and plan options available. For a complete list of all required disclosures, see the ERISA diagnostics Participant Disclosure Checklist.
  • Administrative Expense Information. These disclosures include an explanation of the fees and expenses for general plan administrative services (i.e., legal, recordkeeping, etc.) that may be charged against the individual accounts. You also need to share how such fees will be paid and on what basis they will be allocated (pro rata or per capita).
  • Individual Expense Information. Participants must be provided an explanation of any fees that may be charged against their individual accounts.

Additionally, plans are required to disclose some fee information on a quarterly basis. You have to give participants a statement that includes the dollar amount of administrative fees at the plan level and the dollar amount of individual fees that were charged in the preceding quarter. It must also explain what services these charges paid for. For example, you can’t just say that a participant was charged $25. Rather, you must disclose that the $25 went to pay for recordkeeping.

The first quarterly disclosure, for the period from July to September 2012, must be made no later than November 14, 2012.

Compliance Help is Possible

Do all those disclosures sound like a lot of work? Even though compliance is your obligation, the good news is that reputable record keepers have stepped up to take care of this compliance requirement.  There is also a model chart available from the Department of Labor if you choose or are required to provide the information without assistance from service providers.

When preparing disclosure communications for your plan participants, make sure to include all the information they need to fully understand the disclosures. Tell them what they were charged, why the charge was incurred and why that charge is important. This open communication will help participants understand the costs and the value of plan participation.

Let our Ohio Employee Benefits Professionals Lighten the Burden

As your plan participants receive this information, they may have questions about their fees. Why do they pay them? Are they reasonable?  You have a fiduciary duty to determine fee reasonability, but you don’t have to do all the work yourself. Contact Rea & Associates.  Our PlanComparesm benchmarking service can help you keep your plan compliant and your participants happy.  It might even save the plan money.   Contact Rea’s Ohio Retirement Plan Services team to learn about how PlanCompare can help you do your fiduciary duty.

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