Now that 408(b)(2) provider disclosure is two years old, what have we learned? According to a recent speech by Kristen Zarenko, Senior Law Specialist at the DOL’s Employee Benefits Security Administration, not as much as the DOL had hoped. In fact, some larger plans can't even produce the required disclosure documents.
Beyond the obvious, EBSA is concerned that some provider disclosure is very difficult to understand. Some suspect that providers have not gone out of their way to make these disclosures easy to understand — which is why the DOL is considering new regulations that would require summary disclosure.
Though disclosure is the first step in the process, determining whether the fees are reasonable is the obvious next step. After all, ERISA requires that fees be reasonable, not just that plan fiduciaries understand them. This raises a whole host of questions. For example, plans should compare to peers based on plan size and company type. But comparing a Dunkin Donuts shop to a law firm, even though they may have the same number of employees, makes no sense. Can you rely on published research or should plans go out to bid periodically? If you do rely on research, you need to ask about the validity of the source, their research methodology and the date of the survey. And though advisors help clients compare investment and record keeper fees, who's helping them compare their advisors’ fees?
