Any radical change to a business, industry, or an organization is going to take some time to adjust. Sometimes it becomes a work in progress because there maybe some tinkering with that change because of some negative blowback or unintended consequences.
The retirement plan industry was an industry that was cloaked in legalese, hidden fees, and jargon. I blame the legalese and jargon on the attorneys and many retirement plan providers who felt that using jargon was a clever way to hide their fees.
The Department of Labor (DOL) tried to fix that issue through fee disclosure so plan sponsors and plan participants so that they finally knew what they were paying for. Many plan providers were able to clarify these fees with easy to understand disclosures for both plan sponsors and plan participants. Many other providers did not, either because they were trying to continue to hide their fees or (in the most likely scenario) were drafted by attorneys who only speak in legalese.
Since many plan sponsors are confused, the DOL is seeking comments on a proposal to require some sort of guide to fee disclosures if the fee disclosures take up quite a few pages. I call it the guide to the guide, mainly because the initial disclosure was supposed to be that guide to fees.
I’m a big fan of easy to understand fee disclosures and one of the big reasons for this mess is that the DOL did not provide sample plan sponsor disclosures that they had done with the participant disclosures. Maybe it was difficult for the DOL to come up with sample language that any plan provider could use, but any point of reference would have helped.
I just know when it comes to my retainer agreements with clients; my fees are explicit and easy to understand so that the client knows what it will cost them. Except for government audits, my fees are flat and have a point and an end (unlike fees based on the hour). There should be no reason that a financial advisor or third party administrator’s fee disclosure should be more than a page or two. That’s just my opinion.
So for those plan providers that were slaving away on those fee disclosures, you may have to go back to the drawing board.