It is rare that regulations translate to an opportunity. But this is exactly what the new regulations coming out the DOL are doing.
Long overdue the retirement market and 401(k) plans, the DOL has been working hard to provide greater transparency and require that plan sponsors perform and document that they have performed their fiduciary due diligence in cost justifying the fees and expenses they are paying.
Employees in 401(k) plans are the most at risk. They typically don’t have any knowledge about investing and don’t understand how the plan works or the fees in their investment options.
Most trustees do not handle the day-to-day operations of their plan. This responsibility is delegated to an employee, typically to the HR director who is unfamiliar with the regulations and their fiduciary responsibility.
Department of Labor’s new fee disclosure and fiduciary oversight regulations in force since July of 2012 were designed to address excessive hidden fees and other lucrative industry practices. “An ordinary American household will pay, on average nearly $155,000 over the course of their lifetimes in effective fees” according to Demos.org.
Yet, while the new regulations help large plans get better value and lower fees for their people, small – mid-sized companies lack the resources to have specialized ERISA/401k fiduciaries and legal expertise on staff.
As a result, many are starting to outsource this function to independent SEC Registered Investment Advisors to level the playing field with their larger counterparts; adding up to an additional 20% to 30% to their 401(k) retirements accounts while maintaining full compliance with DOL ERISA Section 408(b)(2) Fee Disclosure regulations.
This is why the 401(k) disclosure regulation can be a big win for small business. Allot of business owners let their 401(k) plan run on auto-pilot, believing their plan is fair priced and running ok.Plans under a 100 million, historically have been the highest cost plans with the most complex and confusing fees.
The new DOL regulations require providers to disclose fees and plan sponsors to run their plan in the best interest of their employees, ensure that cost are reasonable and have investments that perform well.
So, to get the word out, we’re doing a lot of educational events to help employers navigate the complexity of the new regulations while helping to provide the knowledge to cut excessive fees while improving the performance of your current plan investments.