With the retirement plan fee disclosure date around the corner, plan sponsors are gearing up for a deluge of information from retirement plan service providers.
July 1 is the date when the Labor Department's fee disclosure regulation for retirement plans goes into effect, requiring service providers, including advisers, to break out the details of the fees they charge and the services they provide to plan sponsors.
The fee disclosures promise to be an aggravation for employers, as well as their advisers, who'll have to comply with the regulations and break out the details on their fees and services.
Dave Gray, vice president of 401(k) client experience at The
Charles Schwab Corp., said that plan sponsors will be struggling with the fee disclosures and will require advisers' help to leaf through the information.
“Plan sponsors will have 25- to 30-page documents with all the fees spread out, and they will need help getting a consolidated view,” he said after a conference call with reporters Tuesday.
Out of all the information that must be revealed to plan sponsors and participants, investment fees could very well be the most surprising. “The number for investment costs is going to be eye-opening for many folks,” Mr. Gray said. “Most individuals don't realize that there are costs associated with 401(k)s.”
Though participants have to work with the investments provided by the employer, financial advisers working with plan sponsors can help determine the reasonableness of the fees and look into lower-cost alternatives. “There's an opportunity to help as an adviser, perhaps by looking at indexed funds,” Mr. Gray said.
Naturally, fees aren't everything. “Don't put all your money into the single- lowest-cost fund in the plan,” Mr. Gray said. “It's important that people are well-diversified, but where there is an opportunity to use a low-cost fund and achieve the same [results] — we encourage people to look at that.”
Finally, Mr. Gray noted that financial advisers can help plan sponsors draft a fee policy statement, which details how employers want to allocate their fees in the plan. Such information will show up in the participant fee disclosure.
Employers could opt to adjust the way they pay their fees or shift the fee burden to themselves a little more, further away from the employee, Mr. Gray said.
