ASPPA and CIKR Support Uniform Rules for Disclosure of 401k Fees to Participants
ARLINGTON, VA, July 20, 2007 -- The American Society of Pension Professionals & Actuaries (ASPPA) and the Council of Independent 401k Recordkeepers (CIKR) jointly recommended today that the Department of Labor (DOL) consider uniform rules for the disclosure of 401k fees and expenses to participants. The comments were included in a comprehensive response filed with the Department of Labor (DOL) with respect to its Request for Information (RFI) regarding fee and expense disclosures to participants in individual account plans. In their comments, ASPPA and CIKR provided an example of a sample fee disclosure form (a "fee menu") listing potential 401k fees and expenses that could be charged to a participant's account and recommended that plan fiduciaries make comparable disclosures available to their participants on an annual basis.
"401k plan fees and expenses can have a significant impact on a participant's retirement benefits over time," said CIKR Chair Tommy Thomasson, President/CEO of DailyAccess Corporation. "It is crucial that fee and expense information be available to 401k plan participants in a readily available and understandable fashion in order to allow them to evaluate the investment options available to them."
The RFI, which was issued on April 24, 2007, seeks information concerning what administrative and investment-related fee and expense information participants should consider when investing their retirement savings, the manner in which the information should be furnished to participants and who should provide that information.
The exemplary fee menu proposed by ASPPA and CIKR lists the following direct expenses that could potentially be charged to a 401k participant's account on a plan level basis: (1) investment expenses (e.g., expense ratio and other expenses particular to a specific investment option); (b) fees on total plan assets (e.g., wrap fees); and (c) administrative charges (e.g., administrative fees and transaction-based fees). The comment letter notes that the fee menu should include sufficient flexibility to enable various types of fees to be disclosed within the context of uniform rules. The disclosure will vary based on the services and fee arrangements authorized by the plan fiduciary.
As explained by ASPPA Executive Director/CEO, Brian H. Graff, Esq., APM, "ASPPA and CIKR strongly support the DOL's initiative to improve the transparency of fees charged to 401k plan participants. We believe our exemplary fee menu of potential fees and expenses would enable plan participants to make a comprehensive evaluation of all the various types of investments available in a plan, regardless of the type of investment option (e.g., mutual fund group annuity, stable value, collective trusts, etc.) or the structure of the service provider's fee arrangements."
The ASPPA and CIKR comment letter recommended that as the DOL develops comprehensive 401k participant disclosure requirements, they consider the most simple and cost-effective way of providing these disclosures in order to avoid discouraging plan sponsors from offering plans and plan participants from participating in the plans. Accordingly, ASPPA and CIKR recommended a global, annual snapshot of potential investment fees and expenses that could be charged against a participant's account that would be significantly less expensive to produce versus the calculation and reporting of participant-specific fee information. ASPPA and CIKR also strongly suggested that any new disclosure obligations be permitted to be disclosed electronically, as mailing costs can often triple the costs of any required disclosure. To the extent participants would want this information on paper, it would be provided only upon request. ASPPA and CIKR further recommended that any guidance the Department develops with respect to 401k participant fee disclosure not be contingent on ERISA §404(c) compliance.
About ASPPA
ASPPA is a national organization of over 6,000 retirement plan professionals who provide consulting and administrative services for qualified retirement plans covering millions of American workers. ASPPA members are retirement professionals of all disciplines, including consultants, administrators, actuaries, accountants and attorneys. Our large and broad-based membership gives ASPPA unique insight into current practical applications of ERISA and qualified retirement plans, with a particular focus on the issues faced by small- to medium-sized employers. ASPPA's membership is diverse but united by a common dedication to the employer-sponsored retirement plan system.
About CIKR
CIKR is a national organization of 401k plan service providers. CIKR members are unique in that they are primarily in the business of providing retirement plan services as compared to financial services companies who primarily are in the business of selling investments. As a consequence, the independent members of CIKR offer plan sponsors and participants a wide variety of investment options from various financial services companies without an inherent conflict of interest. By focusing their businesses on efficient retirement plan operations and innovative plan sponsor and participant services, CIKR members are a significant and important segment of the retirement plan service provider marketplace. Collectively, the members of CIKR provide services to approximately 68,000 plans covering 2.8 million participants and holding in excess of $120 billion in assets.
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