With the July 1 rollout of new ERISA section 408(b)(2) fee disclosure regulations, we’d like to clarify how you will be able to use these disclosures. As part of these new regulations, covered service providers (financial professionals and third party administrators like PASI who work with retirement plans) are required to disclose their fees and the services they provide to plan sponsor clients.
PASI has been providing you with much of this information already. As a plan sponsor, you have a fiduciary duty to plan participants to evaluate whether your plan fees are reasonable for the services received. How should you determine this?
PASI’s Core Value Proposition
PASI is proactive, not reactive, in helping you meet your retirement plan objectives. That means our service includes:
- Communication – Constant, open and detailed communication is key to creating and maintaining high-quality retirement plans.
- Responsiveness – PASI always encourages your calls and questions. In 99% of all situations our responses occur on the same day (usually within 1-2 hours). PASI strives to provide the right answer in our first communication. In the rare instance that we cannot provide an immediate resolution, we will research the issue and respond to you within a stated time frame.
- Annual Review of Plan Design – PASI monitors your plan design to ensure its provisions meet your company’s specific requirements and encompass changing priorities and demographics.
- Annual Management Meetings – PASI meets with your key decision-makers annually, bringing the plan review to the forefront. Our experience has shown these meetings are key to preventing unintended design flaws and supporting the ongoing success of the plan.
- Compliance – PASI is your “first line of defense” on ERISA issues. Our thorough knowledge base of IRS and DOL rules and regulations helps ensure your plan’s compliance.
Making sure your plan fees are “reasonable” is not the same as ensuring they are the lowest fees available. PASI is dedicated to providing quality service for reasonable fees. Placing a value on quality service can be subjective, but focusing only on fees typically means sacrificing in some other area.
Our goal is to help you make your plan as successful as possible overall. To evaluate whether fees are reasonable for the service you’re receiving, you must take into consideration:
- Your plan’s objectives
- The benefits your plan participants receive from the service
- The quality of the services provided
Of course, your fiduciary responsibilities extend only to expenses paid from plan assets.
How do you Assess the Value of Plan Administration Services?
PASI’s fees are neither the highest nor the lowest when compared to industry averages. We strive to balance our overall fees with the services and costs our plan sponsors expect. Value-conscious consumers seek to maximize benefit and minimize cost; PASI’s business model has long been to accomplish both for our clients.
In determining how valuable your plan administration services are, start with the end in mind: What are you trying to achieve with your retirement plan? Are the services provided helping you meet those objectives? And finally, think about what you are really paying for; it’s not just for general plan administrative services. PASI provides a vast range of personalized services, consulting services, participant education, plan documentation, plan compliance, government filing, plan reporting and fiduciary guidance for clients.
Partnering for Long-Term Success
PASI’s goal is to be your retirement plan administrator for the long haul, helping you provide your participants with the benefits you envision and making the process one you can feel completely confident in. The new ERISA regulations may have modified the format of some of our reporting, but have not changed anything about the way we like to do business. We are always dedicated to providing you with high-quality services that reflect the value of PASI’s role in making your retirement plan a success.
New ERISA Fee Disclosure rulings weren’t the only important changes to go into effect on July 1, 2012. New Department of Labor (DOL) rules did as well. They specify other requirements for contracts with retirement plan service providers to be “reasonable” as well.
What to Know about the New Law
The new DOL rule covers contracts between benefit plans subject to ERISA and plan service providers (like PASI). The new disclosure rules don’t apply to health and welfare plans yet, but that is coming in the future.
Contracts for services will now be judged to be “reasonable” only when covered service providers make certain disclosures reasonably in advance of the plan’s effective date (or extension or renewal date) and update the disclosures for changes or to correct errors in a timely manner.
What to Do
PASI clients can rest assured we are doing everything necessary to comply with this new ruling. Some of the ways we do this includes helping clients obtain and understand the following:
- Written contracts. They’re the only reliable way to demonstrate what the terms are and whether they are compliant. We always provide written contracts for our clients.
- Comparison of the terms. We help clients understand how the terms compare with similar plans, including compensation being paid. PASI notifies clients of the standard of care it will observe as plan provider, methods and venues for resolving disputes, which state’s laws apply and terms of indemnification.
- Regular reevaluation of contract terms and reasonableness. We meet with clients as necessary (i.e. annually) to ensure terms are reasonable and reflect current considerations.
- Documented processes to arrange, renew or extend the contract. These can protect you even if terms of a contract are found to be unreasonable in some other way. PASI always provides documented processes for clients.
Providers covered under the new ruling include ERISA fiduciaries, recordkeepers, brokers and any other providers receiving at least $1,000 of direct or indirect compensation for providing services to the plan. In addition to disclosing their compensation reasonably in advance, other items that now must be disclosed include:
- a description of services to be provided
- the provider’s status (under what law the investment adviser is registered)
- the cost of recordkeeping services
- how compensation will be paid (deducted from accounts or investment returns).
One item that remains unchanged: the requirement that contracts allow for the provider’s services to be terminated on reasonably short notice.
Your Responsibilities Now
As an employer, you are also obligated to ensure disclosures are received. The consequences of non-compliance also impact the employer, who is required to report any service provider not complying with the DOL ruling. Noncompliance may result in penalties and taxes that could jeopardize your plan’s tax qualification. You may also be exposing your company to fines and litigation if you’re not ensuring proper disclosures are received.
Locating Lost or Missing 401k Plan Participants
Are you finding it’s difficult to track down lost or missing plan participants? Plan Sponsors are required to use all reasonable means to locate a participant. There are options available to find missing participants, including the IRS’ Letter Forwarding Program. It can feel like a cumbersome process, but it’s one that PASI can help clients with very efficiently and cost-effectively.
If you’d like some help getting those lost and missing participants back into the fold, call us to discuss next steps.
PASI Clients Getting Proactive Help for Deadline on August 30th
Participant-Directed Plan Sponsors: are you ready for the August 30, 2012 Deadline?
It’s a big job preparing for the new Department of Labor 404(a)5 requirements. Plan sponsors must provide Participants with the first annual comprehensive disclosures of the Plan’s investments no later than August 30, 2012.
Check Your Mailbox for our Notice
PASI is proactively generating documentation for clients to satisfy the initial Fee Disclosure requirements, sparing them the hassle of negotiating a series of complex options on plan investment managers’ websites.
We’re sending PASI clients notice of the individualized selections their Plan requires, using our existing knowledge of their Plans and our extensive review of the requirements. This will streamline the process for clients to satisfy the initial Fee Disclosure requirements. Look for these notices to come by post in the coming week.
For more information on how we can help you comply and what information you must distribute, call PASI.
Upcoming Fee Disclosure Deadlines
AUGUST 30: Plan Sponsors to release first annual statement to employees on fee disclosures according to 404(a)(5)
NOVEMBER 14: First quarterly participant statement due detailing fees and expenses according to 404(a)(5)