Time & Attendance
Prevent Call Outs
Implementation & Launch
By Patty Kujawa
Aug. 22, 2012
The annual statements that employees participating in defined contribution plans such as 401(k)s receive this time of year may look different thanks to new rules that aim to help workers understand the costs of each investment in the plan.
Employers with retirement plans where participants get to choose the investments now need to show how much each option costs. The rule, finalized by the U.S. Labor Department in February, isn’t exactly new; it’s simply that the agency wanted a clearer set of responsibilities for providers and plan sponsors to show the costs and fees for services.
It was an important move because, last year, 71 percent of plan participants responding to an AARP survey didn’t think they paid anything for investments in their retirement accounts. The new rule will make sure all participants have fee and expense information needed to make sound investment decisions, a Labor Department fact sheet on the rules says.
Participants should receive the first of two fee-disclosure notices by Aug. 30. This notice should include a listing of all the investments available in the plan as well as the options’ fees and historical performance. The Labor Department requires the notice to include benchmark information for investments with variable rates of return so participants can compare options.
The second notice will go out in November and will be issued quarterly after that. This notice will be more particular to each individual’s account, detailing how much the participant is paying for administrative costs and investment fees. The notice will also include information on loan fees or any other expenses associated with the individual’s account.
In its final rule notice issued in February, the Labor Department estimated the new requirements annually will save nearly $2 billion and 54 million work hours participants currently spend on collecting and organizing expense information.
Since 2007, the Labor Department has been working on rules to make fees more transparent so plan sponsors could offer better investment options and participants could make solid investment decisions. After getting input from industry experts, plan sponsors, service providers and the public, the Labor Department proposed two sets of rules: The first creates a process where service providers gave plan sponsors detailed information on the fees charged, while the second set requires plan sponsors to give participants detailed information on fees. Deadlines for each rule were extended so providers and plan sponsors were given enough time to comply.
Patty Kujawa is a writer based in Milwaukee. Comment below or email firstname.lastname@example.org.
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