DOL Issues New 401(k) Fee Rules

The Department of Labor is setting new standards for the disclosure of reirement plan fees and expenses.
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BOSTON (TheStreet) -- The U.S. Department of Labor on Thursday announced a final 401(k) rule it says will give an estimated 72 million plan participants -- with combined investments of nearly $3 trillion -- greater information on fees and expenses.

Of more interest may be DOL claims of what participants will save in time and money spent collecting fees -- for the year the rules get rolling, 2012, the savings are supposed to be a collective 54 million hours and nearly $2 billion.

The final regulation requires plan fiduciaries to:

  • Give workers quarterly statements of plan fees and expenses deducted from their accounts.
  • Give participants core information about investments available under their plan, including the cost of these investments.
  • Use "standard methodologies" when calculating and disclosing expense and return information to achieve "uniformity across the spectrum of investments that exist in plans."
  • After a participant has invested in a particular investment option, they must be provided any materials the plan gets regarding voting, tender or similar rights in the option.
  • Information must be presented in a format that makes it easier to comparison shop among the plan's investment options.

"This rule provides uniform disclosure to workers about what they pay for investment options in their retirement plans," Secretary of Labor Hilda Solis said in a statement. "For the first time, workers will have at their fingertips important and accessible investment-related information to comparison shop among the plan options available to them."

In April 2007, the Employee Benefits Security Administration, part of the DOL, initiated a formal Request for Information soliciting suggestions and comments from participants, plan sponsors, plan service providers and members of the financial community, as well as the general public, on how existing rules should be adopted or modified.

The final rule will be published Oct. 20 and become effective Dec. 20. The final rule will become applicable to covered individual account plans for plan years beginning on or after Nov. 1, 2011. For calendar-year plans, compliance will be required Jan. 1, 2012.

The anticipated cost of the new rules is $425 million, arising from legal compliance review, time spent consolidating information for participants, creating and updating websites, preparing and distributing annual and quarterly disclosures, and material and postage costs to distribute the disclosures.

But officials would prefer people remember the savings. Over the 10 years starting 2012, EBSA estimates that the present value of the benefits provided by the final rule will be about $14.9 billion.

-- Written by Joe Mont in Boston.

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