Plan sponsors who didn’t get fee disclosures? I’m sure they exist

The question has been asked by many financial advisors, and third party administrators (TPA), and a reporter: “have you heard from any plan sponsors who didn’t get their disclosures from their plan providers?”

The answer is no. While I don’t think the disclosure compliance rate is 100%, I’m sure it’s more than 98%.

For the plan providers that didn’t get the required disclosures, I’m sure we will hear from them later. The reason is that too many plan sponsors are reactive, rather than pro-active. That means that if they haven’t received their disclosure, they aren’t going to bother to ask the providers for one and they won’t. They’ll let the Department of Labor (DOL) get them one after being slapped with a prohibited transaction on audit.

In addition I am sure that there are plan sponsors that still don’t know what disclosures are and the Section 408(b)(2) regulation requirements just like there were Japanese soldiers still fighting World War II 25+ years after the war ended. Again, the only way this is unearthed if another plan provider or sponsors tells them or they get socked by the DOL.

So while I haven’t seen a plan sponsor that hasn’t received a disclosure from their provider or failed to provide disclosures to participants under Section 404(a)(5) regulations, I’m sure they do exist.

While plan providers deserve a pat on the back for getting these disclosures out, I’m awaiting the impact of fee disclosures. Will there be price pressure for providers? Will the lowest cost providers win out? Who will suffer from fee disclosure? Which provider is going to be the first one caught for not providing fee disclosure or providing false information? Looks like it will be some time before we see the winners and casualties of fee disclosure.

This entry was posted in 401(k) Plans, Retirement Plans. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *