In a recent article on FiduciaryNews.com, a headline said, “Will 2012 be the Year of the 401k Fiduciary?” This is prompted by a new definition of who constitutes a fiduciary and the new Fee and Performance Disclosure Rules that are scheduled to take effect July 1.
This may prompt the question of, “What is a fiduciary?” (See video below by Federated)
Fiduciaries are individuals or entities with some amount of discretionary authority over plan assets. All plan sponsors are fiduciaries, but not all fiduciaries are plan sponsors. R.L. “Dick” Billings, president of Billings and Company, said he is a fiduciary and a plan sponsor of his company’s 401(k) plan.
The new rules mandated by the Department of Labor will require more oversight of plan sponsors than in the past. Plan sponsors will be responsible for full disclosure, due diligence and monitoring of providers’ services for fees paid. According to Miller Johnson, a law firm in Kalamazoo, Michigan, “the new rules apply to all plans with participant-directed investment, regardless of the plan’s size.”
These new rules will not be making much of an impact on Billings and Company.
“Knowledge is power,” Dick Billings said. “These new rules will force 401(k) and 403(b) vendors to fully disclose their fees—something we have been doing for years! Too many participants and fiduciaries alike think their plan’s administrative costs are ‘free.’ These new rules will give participants tools to better understand the cost of the services for which they are paying.
“A 2010 survey of 401(k) participants by AARP found that over 70 percent indicated ‘they pay no fees for their plan.’ Logic would tell you that 401(k) vendors do not administer plans for free—their fees are many times hidden as a ‘wrap’ within the plan’s investments. The wrap fee may indeed be “reasonable,” but even a reasonable fee can look excessive when compared with “free”! The intent of these new rules is to educate participants and fiduciaries alike about their plans’ true cost.”
If you have any questions regarding the new rules, Billings and Company’s employees would be happy to assist you. Please go to our Contact Us page to give us a call, or you can see our About Us page to contact a specific employee. You can also read a press release from Corbel, a leading provider of qualified retirement plan documents and software, available here.