Bringing about significant change is a three-step process. It begins with awareness, followed by willingness and capped by action. Though the recent plan- and participant-level fee disclosures might have started the industry on the process, clearly we have a long way to go. After interviewing industry experts and plan advisors, Christopher Carosa of “Fiduciary News” takes a look at the practical effects of Sections 408(b)(2) and 404(a)(5) six months into the process.
Key insights include:
• While some providers might have lowered fees in anticipation of the new regs, some bundled providers just shifted costs.
• Though the template DOL originally suggested might have been flawed, it could have helped to standardize the disclosures and make them more understandable.
• With a struggling economy, uncertainty over the presidential election and now the fiscal cliff, employers have more important things to consider — especially smaller ones who may not be getting much help.
• Will participant disclosures discourage people from saving for retirement through workplace plans — even though for most that’s a better deal than saving outside the plan, which few people do?
Transparency is not necessarily a panacea, and a warning is not the same as protection, especially for those unwilling to take action. (Benchmarking fees would be one example of taking action.) A second opinion often spurs action, but only when it closely follows awareness. That’s where experienced advisors can help reluctant and distracted plan sponsors and participants.
