COLLECTED WISDOM™ On 401k Plan Fees and Expenses

The issue of fees and expenses related to the operation of a 401k plan continues to draw great attention. We have pulled together a number of items that we think will give you a good feel for the issues you need to consider.

401k Fee Litigation May 2009 Update - Summary: Over the past several years, more than two dozen lawsuits have been filed relating to 401k plan fees and, more specifically, revenue sharing arrangements with plan service providers. This is a written update from the Groom Law Group on these lawsuits. Located at: Groom Law Group , May 2009. Click on headline for full article.

Updated Chart of 401k Fee Litigation - Summary: More than two dozen lawsuits have been filed relating to 401k plan fees and revenue sharing arrangements with plan service providers. This is an updated chart showing the current state of each lawsuits. Located at: Groom Law Group , May 2009. Click on headline for full article.

Saving on 401k Expenses in Hard Times - Summary: With the bad economy many are looking for ways to reduce costs for 401k plans. While the largest cost is usually the matching contributions, the expenses of operating a plan are next. However, there are traps for the unwary. Not every expense can be paid from plan assets. Some must be paid by the plan sponsor. This article discusses which can and which cannot. Located at: Reish Luftman Reicher & Cohen, April 2009. Click on headline for full article.

Defined Contribution/401k Fee Study - Summary: As part of an ongoing comprehensive research program, the Investment Company Institute engaged Deloitte to conduct a Survey of defined contribution plan sponsors and create this report to shed light on how fee structures work within the defined contribution plan market. Specifically, this report addresses the mechanics of plan fee structures, components of plan fees and the primary and secondary factors that impact fees. Located at: Investment Company Institute , April 2009. Click on headline for full article.

How New DOL Fee Disclosure Rules Could Affect You - Summary: Over the past year the DOL has proposed a series of fee-related regulations designed to enhance disclosure to the government, to plan fiduciaries, and to plan participants. In this article, the Vanguard Plan Consulting Group focuses on proposed participant disclosure rules that could take effect at the beginning of 2009. Located at: Vanguard Plan Consulting Group , September 2008. Click on headline for full article.

Determining Whether 401k Plan Fees Are Reasonable - Summary: According to this report, "Fuller disclosure of 401k plan fees will not guarantee that all plan participants are informed, but it is undoubtedly a necessary condition for that to occur. With better information on fees, participants should be able to make a more informed choice among plans, increase the size of their retirement nest egg, and enhance their welfare." Located at: AARP , September 2008. Click on headline for full article.

Justifying 401k Fees: A Challenge for Fiduciaries - Summary: Underlying the current spate of lawsuits over 401k fiduciary misconduct (particularly fee levels, revenue sharing, self-dealing, and active versus passive management) is a simple question: Are participants getting their money's worth for the fees they pay? That seemingly simple question gives rise to a multitude of other questions which are anything but simple. Located at: Investment Horizons , September 2008. Click on headline for full article.

Death to the Prospectus Requirement! - Summary: The DOL is on a roll. As of July 22nd, when they published the proposed participant disclosure regulations, they have delivered on three initiatives. This article focuses on the new participant fee disclosures. Located at: 401khelpcenter.com , July 2008. Click on headline for full article.

A Primer on Indirect Mutual Fund Payments - Summary: When it comes to the fees paid to service providers -- like the recordkeeper and the adviser -- participants almost always bear the brunt of the cost. Fiduciaries must be aware of these payments and potential confl icts and must evaluate them. Located at: Reish Luftman Reicher & Cohen , February 2008. Click on headline for full article.

401k Expense Recapture - Summary: The recent focus on fees and expenses is causing many employers to closely examine the fees and expenses of their plans. As a result, some employers have been able to negotiate reduced fees. Located at: Reish Luftman Reicher & Cohen, February 2008. Click on headline for full article.

Department of Labor Issues Guidance on 401k Plan Fees - Summary: As a result of this DOL guidance on 401k plan fees, plan fiduciaries should have access to the information they need to carry out their duties. But given the large amounts of money at stake, and the sheer competitiveness of the 401k industry, comments on these proposed rules will likely be voluminous and contentious. Located at: Mintz Levin, February 2008. Click on headline for full article.

DOL Proposes Regulation and Class Exemption for Fee Disclosure - Summary: The U.S. Department of Labor has released proposed regulations that require certain service providers to disclose information about fees and compensation – both direct and indirect – to plan fiduciaries. Located at: Watson Wyatt Worldwide, January 2008. Click on headline for full article.

Uncovering and Understanding Hidden Fees in Qualified Retirement Plans: -- Summary: In the United States, the level of concern over 401k fees is steadily increasing. However, very few employers understand the nature and scope of the retirement plan industry's business model. Not even the Federal Government fully grasps the issue. Understanding how hidden fees came about, and recognizing the specific types and amounts of such fees, will help employers make better decisions regarding 401k services. Located at: 401khelpcenter.com , November 2007. Click on headline for full article.

Proposed DOL Fee Disclosure Rule - Summary: This document contains the proposed regulation under ERISA that, upon adoption, would require that contracts and arrangements between employee benefit plans and certain providers of services include provisions that will ensure the disclosure of information to assist plan fiduciaries in assessing the reasonableness of the compensation or fees paid for services that are rendered to the plan and the potential for conflicts of interest that may affect a service provider's performance of services. Located at: U.S. Department of Labor , December 2007. Click on headline for full article.

Fiduciary Responsibility for 401k Fees and Expenses - Summary: Fiduciaries are becoming increasingly more concerned about their responsibilities for understanding and evaluating costs and revenue sharing. This article discusses the DOL's view of the responsibility of plan fiduciaries. Located at: Reish Luftman Reicher & Cohen, June 2007. Click on headline for full article.

Updated Primer on DC Fee Disclosure - Summary: Recognizing that clear and understandable information about defined contribution plan fees are vital to employees in these plans, the Committee on Investment of Employee Benefit Assets of the Association for Financial Professionals has released this updated version of its primer on "Defined Contribution Fee Disclosure Best Practices." Located at: Association for Financial Professionals , June 2007. Click on headline for full article.

Transcript of Congressional 401k Fee Hearing - Summary: This is a transcript of the hearing before the U.S. House of Representatives "Committee on Education and Labor" on the subject "Are Hidden 401k Fees Undermining Retirement Security?" held on March 6, 2007. Located at: U.S. Government Printing Office , May 2007. Click on headline for full article.

Dirty Little Secrets of 401k Plan Fees - Summary: In September 2006, eight Fortune 500 companies were named in class action lawsuits alleging they failed to monitor and disclose 401k fees under so-called revenue-sharing arrangements. This article lists a number of red flags to watch for when reviewing a 401k plan offering. Located at: Journal of Accountancy, May 2007. Click on headline for full article.

Fees and Compensation of Advisers and Providers - Summary: A few months ago, the DOL issued a proposed Schedule C for the 2008 Form 5500. That proposal would dramatically increase the information to be supplied to plan sponsors by advisers and plan providers. Advisers and providers should be aware of these potential changes and should be monitoring them carefully. Located at: Reish Luftman Reicher & Cohen, February 2007. Click on headline for full article.

Uncovering and Understanding Hidden Fees in Qualified Retirement Plans - Summary: In the United States, the level of concern over 401k fees is steadily increasing. However, very few employers understand the nature and scope of the retirement plan industry's business model. Not even the Federal Government fully grasps the issue. Understanding how hidden fees came about, and recognizing the specific types and amounts of such fees, will help employers make better decisions regarding 401k services. Located at: 401khelpcenter.com , February 2007. Click on headline for full article.

Class Actions Highlight Need for Fiduciaries to Focus on Fees - Summary: The defendants include plan fiduciaries, plan sponsors, members of the sponsor' Board of Directors and others associated with the 401k plans' administration. The lawsuits may signal the beginning of a new round of ERISA class litigation. Located at: Pillsbury Winthrop Shaw Pittman LLP , November 2006. Click on headline for full article.

Frontal Assault on 401k Fee Practices - Summary: In a series of seven class action lawsuits filed on September 11, 2006, plaintiffs' attorneys launched an all-out assault on the fee structure employed by most 401k plans. Located at: Spencer Fane Britt & Browne, September 2006. Click on headline for full article.

401k Class Action Documents - Summary: Spencer Fane Britt & Browne has made available the class-action documents filed on September 11, 2006, by the St. Louis law firm of Schlichter, Bogard & Denton. Located at: Spencer Fane Britt & Browne, September 2006. Click on headline for full article.

ERISA Plan Expenses Overview and Checklist - Summary: The assets of an ERISA plan may be used for two purposes: (1) to pay benefits, and (2) to pay the reasonable expenses of administering the plan. Here is an overview and checklist prepared by the Groom Law Group. Located at: Groom Law Group , October 2005. Click on headline for full article.

New Tools Help Plan Sponsors Fulfill Fiduciary Duty - Summary: One of the big dilemmas that plan sponsor fiduciaries have is just gathering and understanding all the fee and expense information related to their 401k plan. It seems like the retirement industry makes it hard to get a handle on the data, but two recent tools have been made available to that should greatly help overcome the problem. Located at: 401khelpcenter.com, September 2004. Click on headline for full article.

Understanding Retirement Plan Fees and Expenses - Summary: As the sponsor of a retirement plan, you are helping your employees achieve a secure financial future. Sponsoring a plan, however, also means that you, or someone you appoint, will be responsible for making important decisions about the plan's management. Many of your decisions will require you to understand and evaluate the costs to the plan. This booklet will help you better understand and evaluate your plan's fees and expenses. While the focus is on fees and expenses involved with 401k plans, many of the principles discussed in the booklet also will have application to all types of retirement plans. Located at: U.S. Department of Labor , August 2004. Click on headline for full article.

Uncovering Hidden 401k Fees - Summary: As a plan decision-makers, you can have a significant impact on the cost of your plan. You can lower the plan's overall expense structure by shopping around, being an informed buyer, and favoring high-quality, lower-cost investment vehicles. Here are some question you should consider asking any current or future plan service provider. Located at: 401khelpcenter.com, July 2004. Click on headline for full article.

Hidden Costs and High Fees Eat Into 401k Plan Benefits - Summary: Although fallout from the mutual-fund trading scandals still dominates the headlines, some companies with 401k plans reserve their greatest ire for another issue: fees. Complaints focus mainly on the steep fund expenses that are passed on to plan participants — an average of 156 basis points for administration, plus commissions and other transaction costs — and on how hard it is to determine what individual charges the fees include. Both those concerns reflect what plan sponsors say is an historic culture of unresponsiveness among funds to fee-related questions. Located at: CFO.com, May 2004. Click on headline for full article.

What Does Your Plan Really Cost, And How Can You Lower It? - Summary: The pressure is on sponsors when it comes to funding their retirement plans. There is only one place to look for help, and that is plan expenses. While plan fees and expenses appear simplistic, there is much more to the subject than meet the eyes. This article helps you connect all the dots. Located at: 401khelpcenter.com, May 2003. Click on headline for full article.

Looking Under the Hood of Your 401k to Understand the Real Costs - Summary: One of the big challenges facing plan sponsors is determining their plan's real overall cost in light of the various interdependent cost components: plan design, service provider selection, investment management, recordkeeping, plan administration, participant services. Meeting this challenge requires a level of expertise, industry knowledge and experience that most plan sponsors don't have, and often don't invest the time or effort to gain access to. Located at: 401khelpcenter.com, September 2003. Click on headline for full article.

DOL Guidance on Settlor v. Plan Expenses - Summary: In an effort to specifically address the most frequently raised questions, the Employee Benefits Security Administration has developed a set of six hypothetical fact patterns in which various plan expense issues are both presented and addressed. Located at: 401khelpcenter.com. Click on headline for full article.

DOL List of Plan Expenses - Summary: DOL Kansas City Office lists items to be paid by the plan sponsor or allocated between the sponsor and the plan. Located at: Reish Luftman Reicher & Cohen. Click on headline for full article.

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