Who Discloses What?

New regulations clarify the duties of qualified retirement plan fiduciaries and advisors. Posted using ShareThis Financial Advisor Magazine By Janet Aschkenasy Pending regulations from the Department of Labor require retirement plan vendors to disclose in writing just what services they provide to qualified retirement plan sponsors, and what sorts of compensation they’re receiving—including gifts, awards, trips, research, finder’s fees, soft-dollar payments, fees deducted from investment returns and other kinds of compensation. There are several steps advisors need to take immediately to prepare for the regulations, says attorney Reish. Not only does 408(b)(2) shift the burden to the service provider, he notes, but the information must be delivered sufficiently in advance of entering into the arrangement to give the responsible plan fiduciary time to review the information before entering into the transaction. It’s important to keep in mind that the reasonable-contract fee disclosure regulation appears as part of a multifaceted Labor Department effort. This includes the department’s so-called rule, “Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans,” requiring plan fiduciaries to disclose the dollar amount that each participant pays for administrative services such as accounting and record keeping every quarter. The Labor Department estimates that those disclosures would save participants $6.1 billion over ten years, including $2.3 billion from lower fees as investment houses become more cost-aware and more competitive. Reish believes that those particular regulations won’t take hold until 2010. Members of the private sector have argued strongly that it will take another year at least to get up to speed with all the new rules, he says, and “people can only do so much.”