The Department of Labor’s Employee Benefits Security Administration recently released the final rule to help Americans invest and manage money in 401(k) plans with additional clarity. Many experts are referring to the new regulations as the Fee Disclosure Rules or simply 408(b)(2). The overall idea is to provide plan sponsors (employers) and plan participants (employees) in retirement plans transparency in the form of plan information, conflicts of interest, mutual fund expenses, and other fees that may apply. Among other things, the final rules reinforce the fact that plan sponsors are fiduciaries for their employees and are held to the highest standards of prudence. The new regulations go into effect on July 1, 2012 with plan sponsors (employers) required to provide the Fee Disclosure Statement within 60 days – August 30.
These new regulations will have only a small effect on most Registered Investment Advisors that work on a fiduciary, fee-only basis. However, they will greatly affect commissioned based advisors offering 401(k) plans who are not working as a fiduciary. Employers offering 401(k)s will seriously have to consider if it makes sense to work with an advisor that is not acting as a fiduciary and carefully review the conflict of interest that commissioned advisors present. With the upcoming new regulations, now is a good time for small businesses to review their retirement plans to make sure they are aware of any conflicts of interest, review the reasonableness of fund fees and administration fees, assess if the advisor they are working with is a fiduciary, and review all documents with an experienced ERISA attorney.