Concerns Linger About DOL Fee Disclosure Guidance

Some advisers say certain issues did not make the FAQs about fee disclosure in the Department of Labor’s recently issued field assistance bulletin. 

In response to the many questions surrounding the upcoming fee disclosure regulations, the Department of Labor (DOL) issued a Field Assistance Bulletin (2012-02) in Q-and-A format that addresses the types of covered plans, administrative expenses, brokerage windows and investment-related information, among other topics. It also answers questions about disclosing plan-related information and how to deal with revenue sharing. (See “DOL Issues Additional Guidance for Participant Fee Disclosures.”)

Some advisers say the guidance is very helpful, but feel there are still some lingering concerns. 

Brian Giles, senior client relationship manager with White Oak Advisors, said one of their biggest concerns for plan sponsors is the lack of a required format for fee disclosure. In other words, Giles told PLANADVISER, “each covered service provider can select  their own format—and the disclosures can run 10 to 15 pages in length. “The DOL indicated they would consider a summary document but they backed off, so service providers  can elect to disclose information about fees in whatever format they choose.

“When plan sponsors  don’t clearly understand what they’re being presented with, there’s uncertainty in our mind that they will understand what the total fees are in aggregate.”

Jim Robison, an adviser and principal of White Oak Advisors,  stated the regulators have addressed lingering questions in the industry and called the examples in the bulletin helpful, but is concerned the fee disclosure regulations have no requirement for a summary; therefore, no succinct statement with the disclosure.



“Some of the DOL’s tactical responses do help plan providers to better understand the regulations,” Robison said, “[but] that bow on the package would be a clear summary of the fees embedded in the report itself, and a template that allows for a fairly quick assessment of the reasonableness of the expenses.”

Robison pointed out that most plan participants recognize there are expenses associated with providing various services, but “there’s no great and succinct way to quantify” those expenses. Additionally  the time it takes to comply will likely result in increased fees, at least temporarily. “When the disclosures take effect,” he predicts “[there will be] some level of additional expense that should lessen as time goes on and people become more familiar with the templates.”

Time will tell if service providers have created usable forms. The templates might be more of an issue at the non-national service provider level,  Robison said. Multinational benefits firms likely have created a uniform template. It’s less likely that the independent shops—non-national providers and third-party administrators—have developed uniform templates, he added. 

“There are a lot of impediments to trying to standardize,” Roberta Ufford, a principal with Groom Law Group, told PLANADVISER. The DOL has talked about it, Ufford said, and had proposed a summary format in February, but they have not gotten a standardized form. When the Department attempted a service provider form, it was never used, Ufford said, “because it tried to be all things to all people.”

Standardized reporting of information was intended to make it easier for plan participants to compare plans.  “Most providers are doing slightly different things, but they are sticking pretty closely to safe harbor versions of the forms,” Ufford said. “The participant level disclosure was difficult enough. It’s very difficult to standardize across so many types of providers.”

The regulations undoubtedly mean more details for sponsors to stay on top of. “It’s clear from the DOL that  upon receiving fee disclosure information the plan sponsor must make sure that all required pieces are embedded in the disclosure,” according to Giles. “If something is missing,  sponsors have 90 days to work with the service provider to correct the information and if not corrected in time  they are obligated to fire that service provider. Otherwise the plan sponsor is out of compliance.”



Another note of caution is for plan sponsors of Employee Retirement Income Security Act (ERISA) 403(b) plans with multiple providers where they receive notices from each provider and then have to package them together in one mailing to participants. It will mean time and effort on their part. “It’s fraught with enough ‘what ifs’ that it will be fairly easy to trip that noncompliance wire,” Giles said.

Part of sponsors staying compliant with 404(c) of ERISA, Giles added, is compliance with participant fee disclosure. “Many plan sponsors rely on 404(c) protection for investment decisions made by participants. Certainly plan sponsors need to keep their eye on that.”

The requirement for all information to be gathered up into one envelope for mailing is still in place when multiple service providers are utilized. It means plan sponsors have to collect notices individually and mail at the same time.

“Another concern for sponsors is the fact that it’s going to be  difficult to provide participants with notices electronically,” Giles said. “Most plan sponsors will have to rely on mail to get participant disclosures out there. It just means time and cost to get it done.

“Some people would like the DOL to relax the restrictions on electronic transmission for disclosures,” he added. “The regulations require an employee to opt-in for electronic disclosure. For  the typical plan sponsor, most  participants have not made the affirmative election to receive electronic disclosures.”

The DOL wanted participants to be able to make educated decisions with all the information in front of them at the same time. “I can understand it, but the practicality is, it’s a lot of work on their part to make that happen,” Robison said.

The regulations may build some momentum within the industry, Robison felt, and could provide an opportunity for change. “From a tactical perspective, enough questions have been answered,” he contended. “Generally speaking, we’re pleased with the points of clarification in the bulletin.”