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401KFEES

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Your 401k

fees are now

disclosed

via 408(b)(2)Disclosure

Rule changes.

Are you sitting

down?

Dealers have a litany of

things to keep track of in

owning and operating a

dealership aside from your main goal

of moving inventory. You are providing

opportunities to your employees for

personal growth, career growth and

nancial growth. In terms of the nancial

growth of your employees, many of you

are utilizing some type of retirement

plan that allows employees to save for

retirement on a tax-deferred basis.

The Department of Labor (DOL) fee

disclosure requirement for 401(k) plans

has been amended and is in effect

as of July 1, 2012. It is important to

understand a few things that impact

you as a plan sponsor, as well as the

liability that you have. You may or

may not be able to pass some of the

liability on to your investment advisor.

The DOL initial disclosure requirement

covers the following areas; services,

status, and compensation (direct,indirect and compensation paid among

related parties), termination fees,

manner of receipt, record keeping

services, and investment disclosure:

platform providers and investment

disclosure: duciary services.

As a sponsor of a qualied retirement

plan, you are a duciary. A duciary is

someone who has a legal and ethical

responsibility to look after other peoples

money. If you have been appointed

to serve on the investment committee

of your organizations retirement plan,

you are almost certainly a duciary. If

you are the trustee or administrator of a

plan by virtue of the position you hold

in your company, you are a duciary.

If you are the one who contracts with

service providers to the plan, you are

known as the responsible duciary,meaning you are responsible for

selecting service providers through a

prudent process. A duciarys interests

must be undivided. The singular duty

of loyalty means that you must serve

the exclusive best interests of plan

participants and beneciaries.

Aside from your liability as a

duciary, are the fees that your

company is paying reasonable?

Some of the mainchanges to the existingregulation include

1. Changes to investment-related

disclosures for record keeping

brokerage services must be

provided at least annually instead

of within 60 days of a change

2. New requirements apply to

record keepers and brokers that

disclose investment related fee and

expense information for designated

investment alternatives by passing

through copies of disclosure

materials of the issuer of the

designated investment alternative

3. The initial disclosure

requirements with respect to

indirect compensation now

require a description of the

arrangement made between the

payer and the covered service

provider pursuant to which the

indirect compensation is paid.

4. Additional descriptions of

annual operating expenses

of designated investment

alternatives are now required.

The changes listed only apply to

service providers to pension plans

subject to the Employee Retirement

Income Security Act of 1974, as

amended (ERISA). If an existing

covered service provider fails to

provide the required disclosures by

July 1, 2012, the 408(b)(2) rules require

the plan sponsor to take action.

Laymans terms

1. If you have a retirement plan,

subject to ERISA rules, you should

have received or will be receiving

disclosures of all the fees you and

your participants are paying.

2. You will be required to report the

feesand have the detail of each

fee and the reasons for those fees.

3. If you have not received the

disclosures you are required

to request them in writing

from the service provider.

4. Once a request has been submitted

you should receive the disclosures

within 90 days. If you do not

receive the disclosure within 90

days you are required to notify th

U.S. Department of Labor (DOL).

5. Also, if you do not receive the

disclosures within 90 days, as the

plan duciary you must determine

to terminate or continue the

arrangement. If you continue the

arrangement you must be able to

show why that decision was made

6. You have a duciary responsibility t

evaluate the plans investment fees.

Regarding number 6 above, if you

have a Fee Policy Statement (FPS) or

a written statement establishing the

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reasonableness of administrative fees,

you are ahead of the game. Some ideas

to include in your FPS would be; (1)

a statement of the fee-related duties

under ERISA, (2) the responsibilities

and roles of the plan sponsor and any

other duciaries, and (3) procedural

guidelines for conducting a review

of administrative service fees.

Evaluating a PlansAdministrativeService Fees

The review of plan fees, investment

fees and administrative fees should

be performed on a regular basis either

annually or every two years. You

should document these reviews to be

able to prove the reviews are being

conducted in accordance with ERISA.

Here are some simple steps to help;

1. Gather enough information for

reviewing the administrative fees

such as: (a) service providers

qualications, (b) the quality

of services, (c) the total fee for

the providers services, which

includes direct and indirect

compensation coming from

investments within the plan

2. Obtain competitive pricing if

getting competitive bids to compare

pricing is too time consuming you

may be able to get assistance

from the plans advisor

3. Draw an appropriate comparison

as there are many types of service

fee platforms (e.g., at rate,

per-participant fee, transaction

based, assetbased fee, or

even a combination, etc.).

4. Determine if the fee is reasonable.

There are many factors used to

determine this such as the service

providers qualications, theservice quality as well as other

relevant factors. Your advisor can

help with this evaluation, and if

needed, they can recommend

multiple replacement providers

with lower service fees and maybe

even negotiate for more services.

5. Plan fees can be paid from

plan assets. Prior to doing this,

the plan sponsor must ensure

three key points; (1) that fee

payments are authorized under

the terms of the document, (2)

the administrative service is in the

interest of the plan participants,

(3) the fee is reasonable.

In summary

408(b)(2) will help more clearly dene

your duciary responsibilities andpossibly mitigate any related liabilities.

Up until now, plan sponsor duciaries

often have not received sufcient

information from service providers (such

as nancial advisors) to make good

contracting decisions. In light of this,

the DOL has decided to specify the

minimum information service providers

must disclose to plan providers. As

duciaries, plan sponsors are obligated

to consider this information before they

enter into agreements with service

providers. The best place to nd the

requisite information is an advisors

proposed client services agreement.

The three key disclosures to look for,

required by advisors under 408(b)(2) are:

Services: What will be

provided and what will not

Cost: Compensation and

sources of compensation

Status: Does the advisor accept

duciary responsibility? (Note:

if the agreement is silent on

duciary status, the provider is

not accepting duciary status)

If you are seeking objective advice or

giving investment discretion to a service

provider, only work with a duciary.

408(b)(2) disclosures can

help plan sponsors:

Reduce regulatory and litigation risks

Make good serviceprovider selections

Delineate roles and responsibilities

Serve the best interests of

plan participants through

duciary excellence

The devil is in the details. There are

many things for you as a duciary

of a retirement plan to be aware

of. You can nd this information

en masse at www.irs.gov.

About The Author:

J.T. Greenwood is a

Senior Vice President a

Concert Wealth

Management. He is als

a Chartered Retiremen

Planning Counselorand works with

company retirement

plans as well as

individuals plan for the

short term and long

term nancial goals. J.T. enjoys spear shing

scuba diving, golf and beach volleyball.

Sources of Information

www.IRS.gov

http://www.irs.gov/retirement/

article/0,,id=257743,00.html

http://search.irs.gov/web/query.

html?col=allirs&charset=utf-

8&qp=&qs=-Wct%3A%22Internal

+Revenue+Manual%22&qc=&qm=

&rf=&oq=&qt=ERISA+408(b)(2)

401(k) Fiduciary Toolkit, sponsored

by Ishares and prepared by the

Wagner Law Group; Plan Fees

Fiduciary Status: Understanding

the different Roles and Status of

401(k) Fiduciaries prepared by The

Wagner Law Group / BlackRock

Putting 408(b)(2) disclosure rules into

practice: A guide for plan sponsors

prepared by the Wagner Law Group

Dechert On Point : A legal update

from Decherts Financial Services

and Employee Benefts and

Executive Compensation Groups