The Department of Labor Tuesday proposed a guide for navigating information provided by service providers, in an effort to help plan executives and fiduciaries of 401(k) defined contribution plans better understand the fees they are paying.
Rules passed in 2012 were designed to help increase transparency, “but that goal isn't served if the disclosures are buried in a mountain of paper,” Labor Secretary Thomas Perez said during a media briefing call.
Phyllis Borzi, assistant secretary of labor for the Employee Benefits Security Administration, said on the call that after monitoring service provider practices since 2012, officials found many “lengthy, complicated disclosures, some full of legalese, spread out among multiple documents. … We are particularly concerned that some employers, particularly small employers, may not be reaping the full benefits of the fee disclosure regulation. Service and compensation arrangements have become increasingly complex, making it difficult for plan sponsors to know what they're getting.”
Ms. Borzi said some kind of “road map” for easily finding information about fees and related income including revenue-sharing would only be required of service providers “who use overly lengthy or multiple documents.”
Labor Department officials do not have a specific proposal in mind, but will know more after a 90-day comment period and completion of some focus groups with executives from small plans.
“The goal here is to do something that's helpful to plan sponsors and fiduciaries, and not overly burdensome. The goal is to get it right,” Ms. Borzi said.
“It sounds like there might be some flexibility,” said David Levine, a benefits lawyer with Groom Law Group in Washington. “It's nice to see that they're open to having a single document.”