PRESENTATION SUMMARY Fee Disclosure Requirements Examining Disclosure Documents Evaluating...
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Transcript of PRESENTATION SUMMARY Fee Disclosure Requirements Examining Disclosure Documents Evaluating...
PRESENTATION SUMMARY
• Fee Disclosure Requirements• Examining Disclosure Documents• Evaluating “Reasonableness” of Fees• Assessing Value• Maximizing your Company’s Plan
PURPOSE
Provide Information the Plan Needs to:• Assess reasonableness of
compensation• Identify potential conflicts of interest• Satisfy reporting and disclosure
requirements
REQUIREMENTS
HIDDEN FEES
COMPENSATION DISCLOSURE• Direct Compensation• Indirect Compensation from source
other than the plan such as 12b-1 fees, soft dollar arrangements or finders fees
• Fees the service provider pays affiliates or subcontractors
• Termination fees
DISCLOSURE SAMPLE
DISCLOSURE SAMPLE
DISCLOSURE SAMPLE
DISCLOSURE SAMPLE
DESIRED OUTCOME VS. REALITY
FROM DOL.GOV• EBSA estimates that significant benefits will result
from the reduced time and cost for fiduciaries to obtain compensation information needed to fulfill their fiduciary duties, the discouragement of harmful conflicts of interest, reduced information gaps, improved decision-making by fiduciaries about plan services, enhanced value for plan participants, and increased ability to redress abuses committed by service providers. These benefits will outweigh the costs associated with the rule.
COMPLIANCE ALERT
For attentive plan sponsors, those excessive payments will be indentified during the process of the 408(b)(2) disclosures…However, I am concerned that plan committees will fail to evaluate and benchmark those payments. If my fears prove to be well-founded, it will inevitably lead to litigation. -- Fred Reish, Chair of ERISA practice at Drinker, Biddle & Reath
Source: Plan Sponsor Magazine September 2012
WHAT IS REASONABLE
• Not defined by DOL, ERISA or Fee Disclosure regulations
• Expenses and quality should be considered
EVALUATING FEES
• Benchmarking
• Request for Proposals
SEEK PROPER ASSISTANCE
TOTAL COST IS IMPORTANT• Focus is on revenue sharing & hidden
fees• ERISA does not differentiate between
types of compensation paid• Plan must be administered for the
benefit of participants
PROCESS MATTERS MOST• Lowest fees aren’t always the best• Compare services of providers• Determine other factors specific to
the needs of your plan• Document, document, document
401K PLANS HAVE CHANGED
OPPORTUNITY EXISTS
• Fees have come down• Your plan needs may have changed• Providers have enhanced services• Additional Participant Tools Available• New Protections for Plan Fiduciaries