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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
Defined contribution plan sponsors should prepare now for expected guidance on more stringent fee disclosure requirements from both the Labor Department and the Securities and Exchange Commission (SEC), according to Bill McClain, Principal at Mercer Human Resource Consulting. Citing the “high profile” of the topic of fee disclosure, Mercer cautions that the SEC is seeking to require that mutual funds provide improved disclosure and that the Labor Department is planning to issue guidance later this year.
Mercer has several suggestions for actions plan sponsors may take in anticipation of upcoming guidance. First of all, plan sponsors should evaluate administrative costs separately from investment costs, and should be able to demonstrate that their plans’ fees are reasonable. To do that, they should gain a full understanding of their current fee and revenue sharing arrangements, says Mercer. A review of current fee disclosure practices to see if additional disclosure is warranted in light of recent court cases and ERISA requirements would also be prudent. Mercer further recommends that plan sponsors confirm that their fee monitoring and oversight processes are “rigorous and up to date, including documentation of fees paid from plan assets.” Another recommendation offered by Mercer is for plan sponsors to think about incorporating educational information into their current communications on plan fee structures. This would give participants the background necessary to assimilate information contained in new guidance.
Plan sponsors participating in a series of forums conducted recently by Mercer expressed concerns that new additional disclosure requirements would discourage employees from participating in their employers’ defined contribution plans, since fee levels that are objectively reasonable might seem excessively high to the average plan participant. The plan sponsors also pointed out that there is a chance that participants could make investment decisions strictly based on a fund’s fees, without considering a fund’s investment objectives or expected rate of return. Mercer’s consultants found that, not only is very little information on plan fees currently being communicated to plan participants, disclosure of fee information is commonly limited to just what is traditionally thought to be required by ERISA §404(c) . That means that participants may only be receiving fee information via fund prospectuses, which may be difficult to understand, says Mercer.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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