401(k) Best Fiduciary Practices
For Plan Overseers that Take Their Fiduciary Role Seriously
In This Issue
New DOL Regulations will be Shocking
Common Mistakes
What to Do Next
To Join Our E-mail List Click Here
Newsletter Archive
Upcoming Topics
  • Misuse of the Word "Fiduciary"
  • Investment Advice inside your 401(k) plan.
  • True Stories on Fees.
  • Assessing Plan Cost.
  • "Do it for Me" Fund Choices
  • Fixed Income Issues
  • 401(k) Provider Teams
  • Importance of Independence

About O'Reilly Wealth Advisors
A Registered Investment Advisory (RIA) Firm.

Our 401(k) plans operate at or near the high end of fiduciary standards of care currently available.  No hidden fees, competitive fees and high quality investment options.   We fulfill the ERISA Section 3(21) responsibilities and bring the ERISA Section 3(38) advisor along with us.
   
Using holistic comprehensive wealth management, we maximize the probability of our individuals/couples clients achieving their goals for the reasons that are important to them.   For more click here.
Contact us.





 

The Novelty of Fee Transparency

Much has been written in the press lately about a seemingly novel idea:


The notion that 401(k) plan sponsors and participants should actually know how much they are paying!


After years of wrangling, and against staunch opposition from Wall Street, the Department of Labor (DOL) has finally issued the third and final step in a series of regulations aimed at ending the long-running ruse of hidden fees in 401(k) plans.


These regulations have taken the form of a three-step process:


Step One:  The enhanced 5500 reporting for 2009 requires service providers to disclose to the IRS, and ostensibly to plan sponsors, the compensation received from retirement plans after the fact.


Step Two:  Regulation 408(b)2, which will lose its current "final interim" label when it goes into effect July 16, 2011. This regulation will require service provider compensation to be disclosed to plan sponsors ahead of time.


Step Three: Last but not least, the just-issued "Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans" rule will require that those same fees and expenses be clearly disclosed to 401(k) participants. This regulation goes into effect for plans with year-ends after November 1, 2011.


All of this regulation is designed to mandate something that seems to be so integral to virtually every other business transaction:


Transparency.


When you buy a gallon of milk, you know that in return for your $3.89 you will receive 16 cups of milk. Even with the fairly convoluted process of buying a car, you ultimately know your "drive-it-off-the-lot" price. But for years, the vast majority of plan sponsors and participants have had no idea how much their 401(k) plans cost.


Now that fee transparency will be mandated, the great unknown is how plan sponsors and participants will respond to this new-found knowledge. Will plan sponsors and participants be appalled with the previously hidden fees and expenses once revealed in the clear light of day? Will they be motivated to make changes to reduce costs? Or, will they simply allow the ever-present inertia that plagues most plans to rule the day? Only time will tell.


But one thing is for sure. Independent, fee-only advisors will no longer have to compete on an uneven playing field. Going forward, plan sponsors will be able to compare service providers on a true apples-to-apples basis. And the ultimate beneficiary will be the 401(k) participants who depend on fiduciaries to truly act in participants' best interests.


Author: Scott Pritchard, Managing Director, Advisors Access, the ERISA Section 3(38) partner of O'Reilly Wealth Advisors


Common Mistakes
 
1) The RTC (resistance-to-change) Factor:  Human beings including plan sponsors don't like change.  This is a time change makes sense - but only if you move to a completely transparent plan.  

2) They Won't Let Go - It's Too Profitable!:   The insurance companies and brokerages are going to do everything in their power to keep their clients in place.  It will be interesting to see how they react and what they say.

3) Waiting Too Late:  There's no reason to wait.   Get into a superior transparent plan and don't wait for the messiness of non-transparent firms attempting to be transparent.

What to Do Next
 
Problem Solved:   Use an ERISA Section 3(21) independent advisor (RIA) that insists on bringing an ERISA Section 3(38) independent advisor (RIA) with them.  They both have strict disclosure requirements built into their licensing so that complete transparency is the norm from day one.   They'll be watching each other as well as the TPA, record-keeper and custodian, that are also independent.    Great checks and balances - a fiduciary wouldn't have it any other way.

Newsletter Archive
Until our next quarterly 401(k) issue.
 
Sincerely,

John O'Reilly
O'Reilly Wealth Advisors
Save 25%
Times are tough.  For those of you joining us in our top two tiers of service that include free ongoing financial plan updates, get 25% off the cost of your initial financial plan.