401(k) Fee Disclosure Comes From DOL

For some time lawmakers have been discussing passing legislation that would increase the transparency of fees, service provider compensation and fiduciary status. Originally the tax extenders act held a provision for defined contribution plans to disclose fees, but this was stripped from the bill among many other items, and handed off to the Department of Labor. The DOL has now issue the fee disclosure rules for service providers and advisors in defined contribution plans.

See the DOL statement here.

Advisors and individuals working with plan sponsors will need provide details of their services and compensation models; as well as stating whether or not they are acting as fiduciaries.

Service providers will have to disclose ALL fees in a consistent manner, including record keeping fees.

This should increase disclosure of the fees that take a large chunk out of 401(k) plans, which will benefit consumers and plan sponsors. The transparency will allow for increased accountability and competition among service providers, which could lead to lower fees for consumers. Considering the economic swings and the amount of people who rely on their 401(k), keeping fees reasonable through required disclosure seems, reasonable.

The “final” rules are technically interim final rules and will go into effect July 2011.

The measure has the support of the American Society of Pension Professionals and Actuaries as well.