Though fee disclosure may seem like yet another raft of paper that will be mostly ignored by plan sponsors and participants, media coverage and plaintiffs’ attorneys will keep the issue front and center, especially for participants. In the automotive and tobacco industries, for example, change was brought about by legal actions after stricter regulations were put into place. In general, those legal actions were initiated by lack of transparency and communication.
Similarly, communication, trust and transparency about 401(k) services will be the keys to navigating the choppy waters of 401(k) fee disclosure. That’s the perspective of well-known consultants Sarah Simoneaux and Chris Stroud. In an article they wrote for the Journal of Pension Benefits — and recently posted on their firm’s website — Simoneaux and Stroud explore the realities of fee disclosure:
• Fees in the absence of value mean nothing.
• Chasing the lowest fee provider may not be the best fiduciary decision.
• Employer fee disclosure is an opportunity for a more clearly defined TPA/advisor partnership.
• Who will be doing the participant fee disclosure distribution?
• Participant fee disclosure has real potential for revolt.
• Do a second “annual” fee disclosure in November to combine all required notices into one package— and charge for it.
• IRS examinations are the real issue for small plans.
• The future will be rocky, but full of opportunities.
