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Key Takeaways from PBTK’s 408(b)(2) Workshop

Posted on March 28, 2012


We had a very well-attended workshop earlier this month to discuss how plan sponsors can best prepare for the Department of Labor’s 408(b)(2) regulations soon to go into effect (July 1).

Mike Fennessy of Great West Retirement gave an overview of 408(b)(2) and offered insight into how companies like his put their fees together. John Lacey with MFS spoke on benchmarking fees and how to decide if the fees you are paying are reasonable. And we also heard from Lloyd Engleman of RBG who showed some sample reports to see what plan sponsors could expect to get from their providers. Some of the key takeaways from the workshop are:

1. Know your covered service providers – anyone who will charge you $1,000 for their services over the life of your retirement plan is a covered service provider who must disclose their fees

2. While 408(b)(2) does require that fees are disclosed, there is no standard format or uniformity to the level of detail that must be submitted. Some providers will have a one page document, others a 12 page report to discuss the fees. Some providers will be more forthcoming and transparent with their fees than others.

3. The DOL will issue fines to providers who do not distribute their fees to plan sponsors by July 1, 2012.

4. The providers will then send the fees on an annual basis going forward. Plan sponsors have the responsibility to make sure the fees are reasonable for the services they are receiving. One way to do that is to benchmark the fees and compare what you paid last year, or to get rates from other service providers every few years to get a better picture of the competitive rates. RBG offered to do a benchmark for anyone who attended, a process that can take several weeks to complete but that will offer insight into the fees paid for services rendered.

5. A few tips were offered to plan sponsors when they review the fee disclosures:

  • Know what share class your retirement investments are in; different share classes have different fees assigned to the same funds
  • Revenue sharing is the fee you can look to trim from the fee disclosures; right now, you don’t see those fees
  • Look for a wrap fee – it is how the providers pay for the plan

6. The plan sponsors should prepare plan participants prior to July 1st about seeing the fees on their plan documents. Employees have not seen administrative fees on the reports in the past, and now they will have questions about why they are paying fees out of the money they have invested in the 401(k) plans.

Please contact us with questions about your employee benefit plan, and if you’d like to receive the benchmarking service from RBG.


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