Transparency Rules for 401(k) Plan Fees Effective This Summer

By Debbie Reiss-Hardesty and Alison M. Stemler

Frost Brown Todd LLC

The U.S. Department of Labor (DOL) has taken the second major step in its efforts to increase the transparency of fee and compensation arrangements in the retirement plan industry. The first step was to make major modifications to the disclosures required in annual Form 5500s, particularly for “indirect” compensation arrangements. Now, new rules under Section 408(b)(2) of the Employee Retirement Income Security Act (ERISA) require that more details be provided to employers that sponsor retirement plans and give the disclosure requirements more “teeth” by making noncompliance very costly. The rules coincide with participant-level fee and investment expense disclosure rules employers themselves must address before August 30, 2012, if they sponsor participant-directed individual retirement plans.

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