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Reasonable Contract or Agreement Under Section 408(b)(2) – Fee Disclosure

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FEE DISCLOSURE

Reasonable Contract or Agreement Under Section 408(b)(2) – Fee Disclosure
A Brief Synopsis: July 23, 2010

Current Status: Passed on 7/15/2010

Affects :
1.) Fiduciary or Registered Investment Advisors
2.) Brokers and record keepers (and others)
3.) Plan Sponsors

Disclosures Required:
1.) To be in writing
2.) Description of services provided and all indirect and direct compensation
3.) Describe whether they are providing services as a fiduciary to the plan

Effective Date: January 1, 2012

Takeaway:
Keen plan sponsors will be surprised by this disclosure. The small businesses that we work with have the attitude that brokers/insurance agents with their plan are acting in a fiduciary capacity and that all compensation is disclosed. Both of these are rare.

The Plan Sponsor still has the fiduciary obligation to ensure that their participants only pay fees that are “reasonable”, which can only realistically be done by reviewing apples to apples comparisons to other vendors. The Plan Sponsor is personally liable and is usually paying a large majority of the fees (due to a typically high balance), so it is to their benefit regardless.

Posted in: Research

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