Compliance July 25, 2007

Retirement Associations Recommend Disclosure Changes to DoL

Twelve associations that represent employers who sponsor 401(k) plans submitted recommendations to the Department of Labor (DoL) on Tuesday on how to improve fee disclosure to participants.
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The 7-page letter is meant to be a reference tool with respect to the Department’s ongoing project under the Employee Retirement Income Security Act’s Section 408(b)(2) on fee disclosure.

In April, the DoL asked for fee disclosure advice, specifically about what administrative and investment-related fee and expense information participants should consider when investing their retirement savings (See DoL Requests Suggestions for 401(k) Fee Disclosures).

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The four joint recommendations submitted to the Department by the groups include:

  • Any new disclosure regime must recognize that plan sponsors and plan participants have markedly different disclosure needs. It is important to avoid the temptation to overload participants with detailed and voluminous information that can impair sound decision-making.
  • Participants need to know about fees and other costs associated with investing in the plan, but not in isolation. Fee information should appear alongside other key facts that participants rely upon to make sound investment decisions. These facts include each plan investment option’s historical performance, its relative risks, its investment objectives and the identity of its adviser or manager.
  • Disclosure should facilitate comparison among investment options, although employers should retain flexibility as to the appropriate format for workers.
  • Participants should receive fee and other key investment option information at enrollment and be notified annually where they can find or how they can request such information.

The roster of those associations who submitted the recommendations include:

  • American Bankers Association (ABA),
  • American Benefits Council (ABC),
  • American Council of Life Insurers (ACLI),
  • The Committee on Investment of Employee Benefit Assets (CIEBA),
  • The ERISA Industry Committee (ERIC),
  • The Financial Services Roundtable (FSR),
  • Investment Company Institute (ICI),
  • National Association of Manufacturers (NAM),
  • Profit Sharing/401k Council of America (PSCA),
  • Securities Industry and Financial Markets Association (SIFMA),
  • Society for Human Resource Management (SHRM) and
  • U.S.Chamber of Commerce (Chamber).

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