Keyword: fee disclosure regulations

The Ivory Tower Returns

At long last, we have the final publication of Yale Law School professor Ian Ayres’ research paper. Not surprisingly, it is still ill-informed — and uses now-five-year-old, incomplete plan data. And despite our attempts to edify him about his flawed methodology, the professor still comes to the same wrong conclusions about fees.   Read More

NY Times Weighs in On 401(k) Fees and Lawsuits

The New York Times took up 401(k) fees in a recent lead article that highlighted lawsuits, especially the 15 cases brought by Jerome Schlichter, as well as last year’s DOL fee disclosure regulations. Stating the obvious —that fees make a difference—the Times calculated that a $25,000 account gaining 7% per year would be 39% higher if fees are just .5% lower. Perhaps prompting the article is Schlichter’s just-filed $35 million settlement of Cigna’s 401(k) participants’ case against Cigna and Prudential.   Read More

What’s the Future of Revenue Sharing?

While recent case law does not suggest that revenue sharing violates ERISA, other court cases like Tibble and Tussey do suggest that fiduciaries have to select the lowest share class available to the plan. These decisions raise the question of whether participants should be paying different amounts — based not on the size of their account balances or the services they use, but on the funds they select and the amount of revenue sharing paid to the record keeper.   Read More

Life After Fee Disclosure

Now that the DOL’s fee disclosure regulations have been in effect for about a year, the conventional wisdom is that for the most part, the participant notices were ignored. Sam Brandwein of Morgan Stanley Wealth Management is taking a longer view in judging the effectiveness of the rules. When looked at from the perspective of whether plan sponsors and participants have changed their behavior, “the rules will be a game-changer – eventually,” Brandwein told a workshop audience at the 2013 NAPA/ASPPA 401(k) Summit in Las Vegas this week.   Read More

Dalbar Ranks Providers on Fee Disclosure

A new in-depth study conducted by Dalbar ranks providers on their 408(b)(2) compliance efforts. Based on the technical requirements of 408(b)(2), Dalbar’s “Transparency Analysis” evaluated and ranked record keepers and others according to five criteria: overall usefulness, cost estimates, description of services, fiduciary status and conflicts of interest.   Read More

Fee Disclosure Challenge Means Opportunity

Despite the weight of anecdotal evidence suggesting that the DOL’s fee disclosure regulations are not achieving at least one of their main goals — educating participants — the rules are here to stay, so everyone concerned must pay attention to them. That message was conveyed by ASPPA’s General Counsel Craig Hoffman at the organization’s annual conference Oct. 30.   Read More

Wave of 401(k) Lawsuits Could Wash Over Plan Advisors Next

Think that 401(k) lawsuits are over? Think again. Emboldened by recent successes and armed with more information through the fee disclosure regulations and benchmarking data, plaintiff attorneys’ next target could be advisors, warns Fred Reish of Drinker Biddle. Section 408(b)(2) only details the fees charged, he notes — providing no sense of whether those fees are reasonable without applicable benchmarking data. Reish warns that advisors whose fees are above the norm could become targets of an ever-active plaintiffs’ bar.   Read More

The Case for ETFs in 401(k) Plans – or Not

We’ve been hearing why ETFs make sense in 401(k) plans for a long time. Especially in light of the DOL’s fee disclosure regulations — which highlight cost and transparency, two of ETFs’ advantages over traditional mutual funds – perhaps their time has truly come. If so much smart individual investor money is leaving mutual funds (especially actively managed ones) and flowing into ETFs, then surely participants in 401(k) plans will follow, right? Not so fast.   Read More

Caveat Emptor — Fiduciaries Beware New Fee Disclosure Rules

The U.S. Department of Labor is on a mission to provide better information to both plan sponsors and participants about plan expenses. At the heart of the DOL’s new rules is the need for plan sponsors and other fiduciaries to discover and clearly understand whether plan fees are reasonable in light of the services provided. The watchword? Caveat emptor — let the buyer beware; or in this case, as the buyer of plan services, fiduciaries and plan sponsors beware!   Read More