How to make sense of the recent Department of Labor Fee Disclosure Regulations as they pertain to 401(k) plan sponsors.

1. 401(k) Fee Disclosure Regulations
Defined a NEW Fiduciary Duty –
Are You Compliant?
Presented by
Janel M. Cross, President
Align Financial Services Group

2. You May be Unaware of Your
Most Significant Fiduciary Duty
The Department of Labor expects
more from you than just collecting
and distributing disclosures.
You are charged with
assessing the
“reasonableness”
of your plan’s fees.

3. Ignorance is NOT Bliss
The preamble to the final regulations indicates that
the DOL does not consider ignorance of these
disclosure rules to be a basis for relief from ERISA’s
prohibited transaction rules.
Source: Reish, Fred et al. “ERISA Service Provider Disclosures:
What Plan Sponsors Need to Do Now” Client Bulletin, July
2012. www.drinkerbiddle.com

4. What is expected of Plan Sponsors?
Upon receipt of the disclosure documents from your
covered service providers (vendors), you must:
1. Ensure that all disclosures received are complete
according to the requirements of section 408(b)2.
2. Determine whether your fees are “reasonable”
relative to services provided.
3. Identify and address any potential conflicts of
interest.

5. “…if a plan sponsor fails to engage in a prudent process to
evaluate disclosures provided by a service provider, or fails to
identify required disclosures that are missing or deficient and
take affirmative action, it will have engaged in a breach of
fiduciary duty and, possibly, a prohibited transaction.”
Source: Reish, Fred et al. “ERISA Service Provider Disclosures:
What Plan Sponsors Need to Do Now” Client Bulletin, July 2012.
www.drinkerbiddle.com

6. Is the DOL Planning to Enforce
Compliance?
In preparation for the release of the regulations, the
DOL added 997 employees in 2009. 70% of those
new hires were added to the enforcement division.
Source: “Retirement Planners Beware: DOL, IRS Beefing Up
Enforcement.” Waddell, Melanie. Advisor One. 06/14/2011

7. Are You Likely to be Audited?
At the end of 2010, the Internal Revenue Service’s
employer plan division disclosed its list of “plan sponsor
audit targets” – small business owners; 403(b) plans; and
U.S. companies owned by foreign entities.
Source: “Retirement Planners Beware: DOL, IRS Beefing Up
Enforcement.” Waddell, Melanie. Advisor One. 06/14/2011

8. First Class Action Suit over 401(k)
Fees Results in $35 Million in Fines
Manufacturer ABB, Inc. was fined for:
1. Failing to monitor fees and revenue-sharing
payments to the plan’s trust company
2. Failing to negotiate rebates to offset or reduce
costs to plan participants
3. Replacing an actively balanced fund with the trust
company’s target date fund which generated more
revenue sharing for the trust company
Source: 11 April, 2012. “Company Hit for $35 Million in 401(k)
Fee Case.” Mamorsky, Jeff. CFO.com

9. Do You Have Time to Research
What is “Reasonable”?
Who will do the homework on what is truly
“reasonable” in order to demonstrate
fiduciary responsibility?
45% of small business respondents indicated that
4.00% was a reasonable fee.1 The average all-in 401(k)
fee paid by small plans is between 0.99% and 1.83%.2
1. Study conducted by ShareBuilder 401(k), cited in “401(k) Fee Disclosure Leaves Small U.S. Firms with Questions.”
11 Sept, 2012. NBCNews.com
2. Study conducted by Deloitte and the Investment Co. Institute, cited in “401(k) Fee Disclosure Leaves Small U.S.
Firms with Questions.” 11 Sept, 2012. NBCNews.com

10. Should You Hire An
Independent Adviser?
“While the evaluation of the reasonableness of
compensation may be undertaken without assistance,
courts tend to agree that it is a “best practice” to
work with a knowledgeable and independent adviser
to assist in this process”
Source: Reish, Fred et al. “ERISA Service Provider Disclosures:
What Plan Sponsors Need to Do Now” Client Bulletin, July 2012.
www.drinkerbiddle.com

11. How Can Align Financial Services
Help?
Our Fee Disclosure Assistance Programs can help
you:
1. Understand revenue-sharing within your plan.
2. Review your disclosures for completeness.
3. Identify potential conflicts of interest.

12. How Can Align Financial Services
Help?
Our Fee Disclosure Assistance Programs can help you:
4. Perform an Independent Comparative Fee
Analysis to Assess “Reasonableness” of your
plan’s fees.
5. Demonstrate to enforcement agencies that you
have been prudent in your attempt to gather
accurate information about the "reasonableness"
of your plan's fees.

13. Take the Next Step!
To receive information about our well-priced plan
assessment packages, please call or email us.
We are also happy to answer any
questions you may have about this
important development.
717.207.9230
janel@alignfsg.com
www.alignfsg.com

14. Securities and advisory services offered through
Commonwealth Financial Network®, Member
FINRA/SIPC, a Registered Investment Advisor
www.alignfsg.com