Plan provider disclosure errors: A program for self correction?

As I have always said, it would take some time to figure out the effect of fee disclosures on the retirement plan industry.

Things should get a little more interesting as ERISA Attorneys Fred Reish and Bruce Ashton have proposed to the Department of Labor (DOL) that the DOL should institute a voluntary correction program to let plan providers and registered investment advisors (RIAs) to correct errors in relation to fee disclosure and pay a set fee rather than get penalized in a larger amount  later by the DOL (which may equal all the fees that the provider or RIA received from a specific plan).

This program would be akin to the IRS’ Voluntary Compliance Program and the DOL’s Delinquent Filer Voluntary Compliance Program.

I’m all for it because I believe that voluntary compliance programs would ensure more compliance by allowing plan provider to correct errors and then punish those providers who don’t when they get caught on audit..

When it comes to retirement plans, inadvertent errors happen all the time. I know, I’ve made a career of helping correcting them.  Working on retirement plans doesn’t require use to be prophets, providers and plan sponsors don’t have to be perfect, they just need a method to strive to be. Allowing plan providers to correct inadvertent errors encourages compliance by having providers acknowledge them while no compliance program encourages them to bury their errors. The movie Casino told us about the holes in the Nevada desert where problems are settled and buried, let us not have a retirement plan landscape that encourages providers to bury their errors and problems when a voluntary compliance program can encourage them to correct inadvertent errors and punish those providers who defy compliance or make “advertent” errors.

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