Harrisburg, PA (PRWEB) March 13, 2012
Conrad Siegel Actuaries, delivering comprehensive employee benefits services, provides tips for Plan sponsors, service providers and participants regarding the fee disclosure changes in 2012.
The first change goes into effect on July 1, 2012. The Department of Labor will be enforcing new regulations that require providers to supply employers with full disclosure on all fees. The second change involves the participants directly. Calendar year plans must furnish their first set of fee disclosures to participants by August 30, 2012. In addition, fees and expenses paid by participants must appear on September 30, 2012, quarterly statements, which must be distributed by Nov. 14, 2012.
“Generally speaking, increased transparency is a good thing for the 401(k) industry and for employers and plan participants,” explains Tom Reese, partner at Conrad Siegel Actuaries. “What’s most important is advanced diligence and communication from the employer so that employees aren’t blindsided the first time they see a statement with fees that some had no idea they were paying.”
Before the Department of Labor enacted these new regulations, many plan participants were never aware of the service charges being paid over the years. Companies should evaluate how employees will react to these changes.
Proactively educating employees can mitigate confusion and the surprise factor. Companies should take the following steps before the end of June 2012:
Obtain a copy of the 401(k) services agreement from service providers
Ask them what systems and processes they have to help inform employees about the upcoming fee disclosures.
Evaluate all fees
Once the services agreement is in hand, plan sponsors have a duty to evaluate the fees and do their best to determine if the fees are reasonable and in the best interest of employees. Organizations need to know exactly what services are being provided, at what cost and why they’re valuable—and to feel comfortable explaining and justifying these fees to employees. In many cases, the largest fees are paid from the plan investments.
However, many employers think that they are receiving services that are free. HR or the financial leadership of the company will need to look at these investment fees closely, as sometimes they can be difficult to understand. Question providers thoroughly so you can answer employee questions forthrightly. If uncertain whether the fees are reasonable, you might need to take additional steps to benchmark the fees against other providers in the marketplace.
Explain the process
When providing employees with an explanation of the charges to their account, explain the process that you went through to ensure that the fees are reasonable.
“Overall, the changes are positive in that individuals and employers will gain full transparency regarding fees,” adds Reese. “However, plan sponsors need to prepare for the changes and communicate well in advance with plan participants or they might have some surprised and upset employees on their hands.”
For more information on the new 401(k) Fee Disclosure regulations, contact Conrad Siegel Actuaries at http://www.conradsiegel.com.
About Conrad Siegel Actuaries
Conrad Siegel Actuaries is one of the largest and most respected employee benefits firms in Pennsylvania. Recognized as both an industry leader and a trusted advisor, the firm stands apart by offering unbiased, fee-based services backed by careful attention to detail. Conrad Siegel partners with its clients to offer a comprehensive source for all employee benefit needs. For more information, please visit http://www.conradsiegel.com.