Although focus has been on 408(b)(2), now is the time to
prepare for 404(a)(5)
Plan advisers who have not already done so should hustle to
help plan sponsors prepare for 404(a)(5).
Plan sponsors must provide fee information to participants
by August 30, 2012,
under the Department of Labor’s
(DOL) Employee Retirement Income Security Act (ERISA) regulation 404(a)(5).
However, with all the attention surrounding the 408(b)(2) regulation—which
requires most service providers of retirement plans to disclose information
about fees and services to plan sponsors by July 1—some industry experts think
preparation for 404(a)(5) is falling by the wayside.
Fred Reish, chairman of the financial services ERISA team at
Drinker Biddle & Reath LLP, is concerned about plan sponsors’ lack of
urgency in 404(a)(5) preparation. Sponsors have the misconception that the
burden of participant disclosure falls on the recordkeeper, when, in reality,
the recordkeeper is simply a service provider operating under a contract and
does not act as the fiduciary, Reish explains.
Many plan sponsors still do not fundamentally understand
that they can be liable for participants’ investment decisions, he says. “It’s
still the plan sponsor’s responsibility. What [they] have not really looked at
is that the legal burden is on the ERISA plan administrator.”