Major New Duties for 401(k) Plan Sponsors and Vendors

The year 2012 will see the full effect of a set of fee disclosure regulations for 401(k) and other defined contribution plans under Employee Retirement Income Security Act of 1974 (ERISA). The new regulations contain an intricate set of enforcement mechanisms and penalties that are new to retirement and investment advisors. The regulations require financial reports to three audiences that all need to be reconciled and, most importantly, used to determine if the fees and payments made by an ERISA plan are reasonable. The first of the three reports is Schedule C of Form 5500, filed annually with the IRS, the Department of Labor, and the Pension Benefit Guarantee Corp. The second reporting is a disclosure of fees and expenses that must be made to each ERISA plan by each covered service provider. The third type of fee disclosure is made to participants in the plan, beneficiaries, and those eligible to participate, before they participate.