For years, mutual funds have used "soft dollar revenue streams" from participants' accounts without their notification and paying what many would consider "kickbacks" to various parties involved.  

Most of these transactions occur completely below the radar.    

Retirement plan service providers had not been legally required to reveal fees received to plan sponsors even though plan sponsors have a fiduciary duty to know.  At the same time, some providers have perpetuated the myth of "free plan administration".  

Major change is coming.  Finally.  But are you ready?     

With fee disclosure regulations to be finally implemented by the Department of Labor in 2012 (at press time, April 1, 2012), plan sponsors (and ultimately participants) will finally get a disclosure of all fees that their retirement plan providers received directly or indirectly.  

No one has bothered to tell plan sponsors what fee disclosure will mean to them.  

Retirement plan fee disclosure under the 408(b)(2) regulations isn't just about the revealing the cost of plan administration, plan sponsors will have to fulfill important duties under the regulations.   One of those: Plan sponsors will have the not so pleasant duty of informing their participants who may not be pleased to find out the high costs after years of thinking the plan was "free" to them..

Why are the fee disclosure regulations such a big deal?     

The plan sponsor and the other plan fiduciaries will need to make sure everything is done correctly by their retirement plan providers to abide by these new regulations 

or run the risk of being penalized for conducting a "prohibited transaction".  

Contact us to learn more about the rules on who has to disclose and what they have to disclose as there is not enough room here.  

Here's one tip: there are rare plan providers that provide complete fee transparency right now - they are already fully disclosed and don't rely on 12b-1 mutual fund fees to pay providers.    

These providers will make your life as plan sponsor much easier.  

What Plan Sponsors need to do NOW to get ready for the Fee Disclosure regulations:

1. Identify their plan providers.

2. Identify their plan fiduciaries.
3. Contact their plan providers to determine how they will be abiding with the fee disclosure regulations and when they should expect the disclosure and new service agreements.

4. Make sure that their plan providers comply with the disclosure regulations.
5. Determine whether the fee disclosures that they received from them actually abide with what is required with the regulations.

6. Retain the fee disclosure to ensure continued compliance by their retirement plan providers.

7. Contact the DOL if a retirement plan provider doesn't comply with the disclosure requirements.

8. Implement a process to review retirement plan providers annually to determine their competence.

9. Shop the plan to competing retirement plan providers every 1-3 years to determine whether the fees they are paying is reasonable in light of the services they received.

10. Hire an ERISA attorney or independent retirement plan consultant to assist in this entire fee disclosure process.

Fee disclosure will be a positive development for the retirement plan industry for the 99% of today's plans that do not already have a transparent plan as they will finally know the entire cost of administering their plan.

*Note:   Most of the content of this article provided by Ary Rosenbaum, ERISA attorney,  http://www.therosenbaumlawfirm.com/ 516-594-1557