In prior blog posts, (see posts from October 26, 2010 and July 15, 2011) I have described new participant fee and investment disclosure requirements that will apply to 401(k) plans and other participant-directed defined contribution plans beginning May 31, 2012. Many participants will learn for the first time the fees they are paying for services such as investment management, custody and record-keeping when the new regulations become effective.
I can’t overemphasize the importance of advance preparation in complying with these new technical requirements, such as providing participants with comparative investment charts showing historical investment returns and with glossaries of standard investment terms. In the process of preparing for the new disclosure, plan sponsors also are learning more about the fees associated with their investment offerings. As a result, investment line-ups are being re-shuffled.
Fidelity Investments recently posted a Reuters article on its website, indicating that many plan sponsors, as the Department of Labor hoped, have been taking a closer look at their investment options and fees in advance of the deadline for initial disclosures and taking more direct action to prepare and control what must be disclosed. According to the article, plan sponsors have been cutting back on the number of mutual fund offerings and trying to lower their fees by seeking lower fee solutions.
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