Learn about the new rules for 401(k) fees

Your June 4 article about 401(k) fees did a nice job shedding light on an issue that should help millions of Americans increase the assets they can retire with. However, it failed to emphasize the added responsibility employers will assume and the significance the Department of Labor is placing on 401(k) fees. It’s important to remember that using 401(k) assets to pay for plan fees is a prohibited transaction unless the fees are deemed reasonable and there are no conflicts of interest. As your article pointed out, the majority of small to midsize companies don’t truly know how much their plans are paying in fees. Thus the problem — if they don’t know how much the plan is paying in fees how can they make the determination if the fees are reasonable?

The defense that your service provider never told you is now gone. The new regs stipulate that if a service provider fails to provide the proper disclosure, it’s the responsibility of the plan sponsor to request it in writing. The plan sponsor is required to report any failure to comply to the Department of Labor and immediately terminate the relationship, otherwise be subject to a penalty. The DOL hired hundreds of new employees specifically to identify plans that have fallen out of compliance, and you can bet they will be looking for proof that a plan has complied with these new regulations.

Though they may be burdensome, I believe most plan sponsors that properly comply with the new requirements will recognize opportunities to drive down their plan costs and improve the chances of their employees reaching a financially secure retirement.

Michael Scott

Des Plaines