A “perfect storm” is an expression that describes an event where a rare combination of circumstances will aggravate a situation drastically. The term is also used to describe an actual phenomenon that results in an event of unusual magnitude.

As 2011 comes to a close, there will be a seismic change in the retirement plan industry. Fee disclosure to plan sponsors by their plan providers and fee disclosure to plan participants in 2012 will change how the retirement plan industry will operate. It will for the first time require plan providers and plan sponsors to disclose actual plan expenses whether they are paid directly or indirectly. In addition, there are other changes as well. By New Years, the Department of Labor (DOL) will finally implement regulations allowing for 401(k) advice to be provided to participants by plan providers. In addition, the DOL is still insistent on changing the definition of retirement plan fiduciary, which will affect the role of many retirement plan advisors. So with all these changes, you have a Perfect Storm for retirement plan sponsors.

Unfortunately like Captain Billy Tyne and the crew of the Andrea Gail, retirement plan sponsors aren’t prepared for the Perfect Storm. Unlike a nor’easter, these changes will bring a lot of good to the retirement plan industry. However, if plan sponsors don’t understand the changes and get prepared for it, they can certainly capsize and risk their plan to unwanted liability.