Fee Disclosure Requirements Post 2012

Tools You Can Use to Grow and Retain Assets under Management

Few in the retirement space will argue that 2012 may be called ‘the year of the fee disclosure.’ And while many contend, not without merit, that the well-intended premise and its anticipated impact on the ultimate beneficiary, plan participant, was lost in the wave of new regulatory burdens and pages of confusing disclosure documents, we know that the fee disclosure requirements are here to stay. In turn, you can capitalize on these requirements to help grow and retain plan assets under management. Retirement Services has made available a number of tools to help you efficiently and effectively accomplish this objective.

The Basics

Let’s recall the basic fee disclosure rules and responsibilities.  There are ‘plan-level’ disclosures that service providers are required to give under ERISA Section 408(b)(2) to plan sponsors (this requirement applies to all plans, whether or not participants have a right to direct their investment accounts); and there are ‘participant-level’ disclosures that a plan sponsor is required to offer to participants under ERSIA Section 404(a)(5) (this requirement applies to plans where participants have a right to direct their investments, e.g. 401(k) plans). Plan-level disclosure rules also require plan sponsors to evaluate the services they receive, whether the fees paid for those services are sensible, and, when necessary, make changes to give the participants a reasonably priced way to save for retirement.

In the small plan market, plan sponsors are less likely to act because at times don’t appreciate the urgency or lack time and internal resources to do the research and implement changes. While it’s the plan sponsor’s ultimate responsibility, they need advisor’s assistance in understanding how their compliance and regulatory obligations can be accomplished. This spells an opportunity to for you to communicate the requirements, offer a solution roadmap, help the plan sponsor evaluate the needs of the plan in light of services available from other third parties, provide actionable advice, and, whenever appropriate, implement a change.

To that end, Retirement Services together with our vendor partners, put together a suite of tools to help you communicate these requirements, conduct the necessary due diligence, benchmark plans, determine the appropriate course of action, and document this process. Dedicated subject matter experts will guide you through the process and help with execution step by step.

1.  Communicate

Plan Advisor Pitch Book – This presentation (available as a pdf and customizable PowerPoint Format) was developed to help you communicate your value proposition as a plan advisor to assist plan sponsors in creating and/or maintaining a successful retirement plan. It describes the process, showcases tools and resources at your disposal to service the plan, and outlines the potential measurements of success.

The following pre-approved letters help communicate fee disclosure requirements and how you can assist plan sponsors in fulfilling them:

  • Retirement Plan Fee Disclosure Requirements
  • Effective Plan Management
  • Do Know Your Plan Fees? Are they Reasonable?

You can access these and other pre-approved letters and conversation points in the Prospect for New Business section on iStation .

2.  Conduct Due Diligence

Due diligence starts with basic fact-finding. To assess current fees and fee reasonableness, there are two tools available for you:

Fee Reasonableness Checklist -This checklist will assist evaluating the reasonableness of fees related to plan operation and management.  Once completed, it is designed to become a part of the fiduciary file to demonstrate the process used for the service provider fee review.

fi360 Report – The fi360 report offers an opportunity to offer a comprehensive review of the plan’s investments. It includes style analysis, benchmarks performance relative to a peer group, and analyzes investment expenses. This analysis culminates in a plan investment report card called the fi360 Fiduciary Score Card. The Score Card vets plan investments against the nine criteria deemed to meet the minimum fiduciary standard of care. Retirement Services will deliver this report to you as a service. To request this report, email the latest plan statement or name of the plan and ticker symbols of current funds  with asset values to pensions@firstallied.com .

3.  Benchmark Providers & Determine Course of Action

Vendor Analysis – How does the current provider stack up against other vendors for plans of a similar size? First Allied Retirement Services developed a proprietary report to assist you, your clients and prospects in benchmarking current plan provider services and fees against what is available in the market place. The database tracks thirty-nine data points and reports those of relevance to your client. Together with the fi360 report and Fee Reasonableness checklist this analysis will help you and your client determine whether the current service arrangement is appropriate or whether changes of provider(s) are in order. To request a report send an email to pensions@firstallied.com .

4.  Document Decision

Once the process is complete, it is important to document it. To assist in memorializing the fee disclosure receipt and determination of reasonableness, we prepared a Plan Services Fee Disclosure Log. Upon completion, it should be kept in the fiduciary file as a permanent record.

How We Can Help

Leverage is the key in offering services to plan sponsors. Subject matter experts at First Allied Retirement Services are available to help you and your prospective and existing clients in the process of fee reasonableness review. We will walk you through every step, from the initial communication to preparation of analysis to presentation of findings so the plan sponsors with whom you work can evaluate the services they receive and whether the fees paid for those services are reasonable, and, when necessary, make changes to make sure that the plan is on the right track. To start, give us a call at (888) 926-0600 or send a message to pensions@firstallied.com .