The Labor Department recently proposed a new rule that would make it easier for employers and employees to locate the exact fees that are attached to their 401(k) retirement plans.
The new rule would be an update to the 2012 rule on the same subject. Department officials said that, since the rule changes in 2012, many disclosure forms have been offered but the majority of them were too lengthy, complex and/or confusing to really be of much use.
Phyllis Borzi, ,the assistant secretary for the department’s Employee Benefits Security Administration, said that “some are filled with legalese, some have information that’s split between multiple documents.” She added that a fee disclosure statement of no more than one or two pages is what the Labor Department envisions for this new rule.
Borzi also said that the goal of these new rules is to give plan sponsors something that’s helpful and not overly burdensome to them and to the participants using their 401(k) retirement plans.
The new disclosure form is sort of like a “roadmap” Borzi said, and it will be able to help employers more quickly and easily locate the information they need as well as better understand what they and their participants are being charged by the financial services providers their 401(k) plans utilize. She went on to say that the 2012 rule was “a good first step in bringing transparency to the 401(k) industry and disclosing potential conflict of interest.”
“However, some employers, particularly small businesses, may be having a hard time locating the required fee disclosures when they are embedded in lengthy or complex documents,” she said.
The new rule has a public comment period that will last for 90 days. Afterwards, the Department of Employee Benefits Security Administration will then hold focus groups on the proposed new rule. Financial firms that are offering 401(k) plans will be involved in the focus group and pension plans that have 100 participants or less will be of particular focus when the new rule is discussed.
“We want to get it right. So we’ll take whatever time is necessary to get it right. We don’t have an ultimate deadline,” Borzi said in a conference call with reporters. “We want to hear what people have to say.”
Those offering 401(k) pension plans to their employees were required, under the earlier rule, to furnish detailed information about their services as well as the compensation that participants will receive, including such things as payments from third parties.