It's taken more than a year for retirement plan service providers to gear up for fee disclosures, but they finally seem to be prepared for the new reporting requirements that go into effect July 1.
Research from Mesirow Financial's retirement plan advisory practice shows that 91 of 100 plan sponsors surveyed were satisfied with the fee disclosure communication they had received so far from plan service providers, including record keepers, fund providers and financial advisers.
If anything, the finding shows that service providers had made the most of their time to prepare for the new rules, which requirement them to spell out to employers fees and acknowledge whether they are a fiduciary, said Chris Reagan, managing director, practice leader for Mesirow's retirement plan advisory group.
Similar disclosure information will go out to plan participants at the end of August.
Originally, the fee disclosure regulations were supposed to be in place last summer. But the deadline was pushed back repeatedly after the Labor Department delayed sending a final version of the disclosure rule to plan sponsors. Mr. Reagan said that service providers having been communicating with plan sponsors using templates that had been posted in earlier incarnations of the disclosure rules.
“My take on this is that the vendors are ahead of the curve and providing plan sponsors with what they're going to need, or at least they're using templates for what they need to disclose to participants,” he said. “This rule has been extended a number of times, so they're waiting to see what disclosures they have to make and what they have to do — and they've been gearing up for a while now.”
The research also revealed some gaps in plan sponsors' efforts to get workers to save as much as they can for retirement.
Half of the plan sponsors said they didn't have an auto enrollment feature in their plan, and 67% said they didn't have step-up deferral rate feature, which would allow workers to transfer more of their money into their 401(k) plans.
Accordingly, 80.9% of the employers said that they don't feel their participants take advantage of the full savings and retirement tools available to them.
Employers and plan service providers are constrained by the amount of time and ways to communicate with plan participants to get them to contribute more money and understand the investment options available to them, Mr. Reagan said. Even workers who are high earners aren't getting as much help saving. Sixty-eight percent of plan sponsors don't offer nonqualified benefit plans, which, among other things, can involve the use of variable life insurance as a savings vehicle and other tactics.
Mr. Reagan noted that he expected a greater push from providers to get plan sponsors and advisers talking about nonqualified deferred compensation. “More 401(k) vendors will do these plans,” he said. “It takes significantly more acumen in the nonqualified world to administer and consult on one of these plans.”