Gearing Up for 2012

Hosted by PLANADVISER and sponsored by BlackRock, Marcia Wagner of The Wagner Law Group covered five key topics for advisers to prepare for as the new year approaches: 1) fee disclosure to participants, 2) 408(b)(2) disclosures, 3) broader “fiduciary” definition, 4) investment education versus advice and 5) strategy and fiduciary pointers.

“The DoL is continuing to work very closely with the White House and its middle class task force,” said Wagner. “Given the unprecedented level of White House involvement in these rules, it is important to remember they are designed to make strategic improvements in 401(k) arena – they are not being issued haphazardly or in isolation from one another.”   

When it comes to all of these topics, Wagner believes “advisers can demonstrate their value by helping sponsors get through 2012 as the DoL rolls out new rules one after another.”

1) Fee disclosure to participants. The DoL issued the final regulations on October 14, 2010. The Department explained that the existing law did not require plans to provide necessary information, whereas the new rule requires clear comparisons of a plan’s investment options.  The new regulations apply to defined contribution plans with participant-directed investments and it covers plans even if it is not designed to comply with ERISA Section 404(c). Additionally, the new regulation applies to all eligible employees, not just those enrolled in the plan.

What needs to be disclosed? Wagner explained that there are two parts to the disclosure requirements; some must be made on an annual basis, others on a quarterly basis.  Annually, participants must receive an explanation of general administrative service fees and individual expenses. Quarterly, the plan must disclose dollar amount of fees and expenses charged to participant accounts. This all must be outlined in a comparative format for all eligible employees to understand (see “DoL Discusses Participant Fee Disclosure Regs”).