Retirement Plan Investment Costs

[Opinion] Vanguard Comment Letter to DOL on Proposals Relating to Service Provider Fee Disclosure
Excerpt:"[T]his comment letter generally supports the regulation as drafted, but we have also noted opportunities for the DOL to provide additional clarity."(The Vanguard Group, Inc.)

Employers on the Hook for 401(k) Fees
Excerpt:"In a batch of class-action lawsuits, employees are holding their employers liable for high fees and poor disclosure in 401(k) plans. While the suits have produced mixed results, experts warn that companies may be more vulnerable to lawsuits than they realize."(Philadelphia Business Journal via American City Business Journals)

Public Comments on Reasonable Contract or Arrangement Under Section 408(b)(2): Fee Disclosure Interim Final Rule
The page links to the 44 comments received by DOL. (U.S. Employee Benefits Security Administration)

[Guidance Overview] DOL's Interim Final Fee Disclosure Regulations (PDF)
6 pages. (Buck Consultants)

[Guidance Overview] Service Provider Fee Disclosure Regulations: Initial Disclosures
Excerpt:"The [covered service provider] must make compensation disclosures relating to four different categories of compensation: (1) direct compensation; (2) indirect compensation; (3) compensation paid among related parties; and (4) compensation for contract termination."(SunGard Relius)

Comments Endorse Fee Disclosure Flexibility, Additional Compliance Time
Excerpt:"A number of the commenters submitting to [EBSA] touched on the issue of whether those covered by the rule being required to comply on an EBSA-prescribed form would prove overly costly or too difficult to develop within the rule's time frame."(PLANSPONSOR.com)

[Guidance Overview] SEC's Proposed Revisions to Mutual Fund Distribution Fees and Disclosure (PDF)
7 pages. Excerpt:"The Proposal has widespread implications not only for mutual funds and their boards of directors and investment advisers, but also for broker-dealers and other financial intermediaries that sell fund shares or service fund shareholder accounts."(Morgan, Lewis&Bockius LLP)

[Guidance Overview] Fee Disclosure Regulation: DOL Provides Leverage for Plan Sponsors
Excerpt:"The Regulation thus shifts the balance of power between the plan fiduciary who is charged with understanding fees that its plans will pay and the service providers that generate those fees. Although a plan fiduciary retains responsibility if it uses plan assets to pay unreasonable fees, the Regulation enhances the fiduciary's ability to obtain the information it needs to determine reasonableness."(Jones Day)

What Matters Most? An Analysis of Investment Committee Hire/Fire Decisions
Excerpt:"Hiring investment managers is harder than firing them, according to Vanguard's second annual survey of investment committee members. At the same time, committees that find manager evaluation more difficult also have a significantly lower rate of manager turnover which, in turn, can reduce investment management costs."(The Vanguard Group, Inc.)

[Guidance Overview] New Retirement Plan Fee Disclosures: Getting Ahead of the July 16, 2011, Deadline
Excerpt:"Although the Schedule C fee reporting rules and the new fee disclosure regulations are similar, the disclosure and reporting requirements imposed by the fee disclosure regulations place significant new burdens on service providers to disclose the fees they expect to receive from retirement plans. In addition, plan sponsors must confirm that proper disclosures are made. Accordingly, both retirement plan sponsors and retirement plan service providers need to be prepared to identify, track and properly disclose compensation paid for services provided to retirement plans."(Thompson Hine LLP)

[Guidance Overview] PSCA Comment Letter on the Interim Final Rule on Reasonable Contract or Arrangement Under Section 408(b)(2): Fee Disclosure
4 pages. (Profit Sharing / 401k Council of America)

[Opinion] Comments of Congressional Chairmen to Regarding Interim Final Regulations on ERISA Section 408(b)(2) Fee Disclosure Requirements (PDF)
6 pages. (Congress of the United States via American Benefits Council)

[Guidance Overview] Service Provider Fee Disclosure Regulations: Service Provider Categories
Excerpt:"The fiduciary/registered investment adviser category consists of three sub-groups: (1) plan fiduciaries; (2) fiduciaries to investment contracts, products, or entities that hold plan assets; and (3) registered investment advisers."(SunGard Relius)

Lawmakers'Letter Urges Keeping 408(b)(2) Disclosures Simple
Excerpt:"A letter to [EBSA] from five key lawmakers urges the agency to require service providers covered by proposed fee disclosure regulations to make their disclosure in a single, clear document."(PLANSPONSOR.com)

[Guidance Overview] DOL Releases Interim Final Service Provider Disclosure Regulation
Excerpt:"In the attached article, the authors provide below an overview of the Regulation, and then discuss how it may be expected to affect plan service providers and plan fiduciaries, noting some of the topics that remain unclear or could be the subject of comments."(Groom Law Group)

[Opinion] John C. Bogle: On Mutual Funds, Cheaper Is Better
Excerpt:"A new study confirms what I've been saying for decades: Paying high fees to fund managers is the route to lower returns."(John C. Bogle in The Wall Street Journal)

[Opinion] 10 Signs Your 401(k) Plan Is a Clunker
Excerpt:"High costs . . . . No investment advice . . . . Revenue-sharing and hidden mark-ups . . . . The plan adviser is not a'real'fiduciary . . . ."(Daily Finance)

[Guidance Overview] Overview for Plan Sponsors and Fiduciaries of New Requirements for Service Provider Arrangements
Excerpt:"The regulations impose information disclosure requirements on providers of certain types of services to certain types of ERISA plans. The regulations also explain what are reasonable termination provisions for services contracts."(McGuireWoods LLP)

[Opinion] Council Comments Regarding Interim Final Regulations on ERISA Section 408(b)(2) Fee Disclosure Requirements (PDF)
13 pages. (American Benefits Council)

[Guidance Overview] Service Provider Fee Disclosure Regulations: Covered Plans and Service Providers
Excerpt:"What service providers are covered by the regulations? A'covered service provider'is a service provider that: (1) enters into a contract or arrangement with a covered plan; (2) reasonably expects to receive $1,000 or more in direct or indirect compensation; and (3) provides services to the plan in one of the categories described in the regulations."(SunGard Relius)

Dodd-Frank Meets ERISA: The Impact of Wall Street Reform on Plan Investments
Excerpt:"Paraphrasing the words of the President -- for all those employee benefit plan fiduciaries who are wondering what Wall Street reform means for you, here's what you can expect. . . . Nevertheless, there are a few steps plan fiduciaries should consider taking now, and some things to keep in mind for the future. Please view the linked ['Pension&Benefits Reporter'] article for further discussion."(Groom Law Group)

[Guidance Overview] New Regulations on Service Provider Fee Disclosure Obligations
Excerpt:"Because the Fee Disclosure Regulations contain a number of significant changes from the proposed regulations, the DOL published them as interim final regulations in order to permit additional comments. Interested persons can comment to the DOL until August 30, 2010."(McDermott Will&Emery)

12b-1 Reform Could Hit American Funds and Others in the 401k Biz Hard
Excerpt:"12b-1 fees as we know them may soon be dead, if the Securities and Exchange Commission has its way, and their quasi-death could have big implications for mutual fund firms working inside 401ks."(Investment Wires, Inc.)

Departure of the'Driving Force'Behind SED Proposal on Fund Fees Raises Doubts About Its Fate
Excerpt:"In fact, experts said the final rule will diverge sharply from the current proposal, which is an effort to limit the use of 12(b)-1 fees to their original purpose -- helping to expand a fund's shareholder base in order to lower costs to investors."(Investment News; free registration required)

[Guidance Overview] Decision to Invest in 401(k) Plan Fund With Higher Fees Was Breach of ERISA Fiduciary Duty
Excerpt:"Importantly, the court did not hold that the choice of retail shares over institutional shares presumptively violates ERISA's fiduciary duty of prudence. Rather, the court faulted the fiduciaries'failure to fully evaluate the fund classes, noting that had this analysis been performed, the fiduciaries would have discovered that the institutional funds offered the same investment at a lower cost than the retail funds."(Employee Benefits Institute of America)

Excessive Plan Fees Cost Companies $31.6M
Excerpt:"Caterpillar, Inc., just agreed to pay $16.5 million to settle an excessive fee lawsuit in federal court, and General Dynamics Corporation just agreed pay $15.1 million to settle a similar lawsuit. Both companies were charged with running 401(k) plans that charged participants excessive investment fees."(HR Morning)

[Guidance Overview] DOL Clarification of Requirements for Service Provider Fee Disclosures (PDF)
7 pages. (Kelly, Hannaford&Battles P.A.)

[Opinion] SEC's 12(b)-1 Proposal: Does It Actually Increase 401k Fiduciary Liability?
Excerpt:"Under the current SEC proposal, the migration from the 12b-1 distribution model to the fee-based model may become the predominant strategy for this simple reason: Even if some distribution system incorporating the new 12b-2 model emerges, 401k plans will have to change their recordkeeping systems to account for individual lots. This accounting method ? which may represent a costly change ? is currently not done for retirement plans."(Fiduciary News)

Money Managers Paid $12 Million to Middle Men to Line Up Kentucky Public Pension Fund As Client
Excerpt:"The public disclosure of the $12 million in payments over five years, including $5 million to a lone middleman, were made with results of a fund audit during a meeting of the $14 billion (assets) Kentucky Employees Retirement System's investment committee."(Forbes.com)

The Gospel According to 401(k) Reformer Matthew Hutcheson
Excerpt:"An advocate . . . for higher fiduciary standards and greater fee transparency throughout the financial services industry, [Matthew Hutcheson] has testified before Congress, written articles and books, helped start the 401(k) rating service, Brightscope.com, and been active in the year-old Committee for the Fiduciary Standard."(Retirement Income Journal)

It's Not Just 12(b)-1 Fees, Say Critics of SEC's Approach to Mutual Fund Cost Disclosures
Excerpt:"As it attempts to crack down on 12(b)-1 fees, the Securities and Exchange Commission is ignoring a raft of mutual fund charges that investors are paying indirectly, critics contend."(Investment News)

[Guidance Overview] Service Provider Fee Disclosure Regulations: The Context
Excerpt:"This Technical Update explains the basis for the DOL's issuance of the regulations and the overall purpose of the regulations."(SunGard Relius)

[Opinion] Low Fees Most Dependable Indicator of a Mutual Fund's Future Performance, According to Study
Excerpt:"Morningstar looked at fees and performance during various time periods from 2005 through March 2010. Over every period and in every asset class -- domestic equity, international equity, balanced, taxable bond and municipal bond -- the cheapest funds, as a group, produced higher total returns than the most expensive group."(The New York Times; free registration required)

[Guidance Overview] Interim Final DOL Regulations Requiring New Fee Disclosures by Pension Plan Service Providers
Excerpt:"The Interim Final Regulations also continue the existing rule (without revision) that no contract or arrangement is'reasonable'if it does not permit termination by the plan without penalty to the plan on reasonably short notice under the circumstances to prevent the plan from becoming locked into an arrangement that has become disadvantageous."(Proskauer Rose LLP)

As Industry Takes Sides in SEC 12b-1 Debate, Will 401k Plan Sponsors Benefit?
Excerpt:"Joe Gordon, Managing Member at Gordon Asset Management, LLC, feels'12(b)1 fees are a notion that has outlived its usefulness. Fund companies do not need to charge these to distribute shares and collect assets. But, if the fees were fully disclosed, transparent, and flashing like a red light, then buyers would not be so easily duped.'"(Fiduciary News)

[Guidance Overview] New Regulation, Effective July 16, 2011, for Both New and Existing Arrangements Between a'Covered Plan'and a'Covered Service Provider'
Excerpt:"The regulation states:'No contract or arrangement for services between a'covered plan'and a'covered service provider,'nor any extension or renewal, is reasonable within the meaning of section 408(b)(2)'unless certain disclosures are made to the responsible plan fiduciary."(Reish&Reicher)

[Guidance Overview] Court OKs $16.5M Caterpillar 401(k) Fee Settlement
Excerpt:"According to the order, the agreement calls for the employer not to include retail mutual fund shares as core investment options in the plans, to increase employee communications about 401(k) investment options and their associated fees, and for an independent fiduciary to monitor the plans during a two-year settlement period."(PLANSPONSOR.com)

[Guidance Overview] Service Provider Fee Disclosure Regulations: The Context
Excerpt:"This is the first in a series of Technical Updates relating to the recently released DOL regulations relating to service provider contracts with plans covered by the regulations. This Technical Update explains the basis for the DOL's issuance of the regulations and the overall purpose of the regulations."(SunGard Relius)

Questions and Answers on Monitoring Client and Investment Fees
Excerpt:"In this post, you'll find answers to the majority of questions submitted during the [fi360 webinar session on the topic] written by the panelists from the original webinar."(fi360)

[Guidance Overview] ERISA Service Provider Fee Disclosure Regulations (PDF)
Excerpt:"These regulations amend existing rules under section 408(b)(2) of [ERISA] and parallel provisions of section 4972(d)(2) of the Internal Revenue Code and regulations thereunder."(Transamerica Center for Retirement Studies)

General Dynamics Settles 401(k) Fee Suit
Excerpt:"General Dynamics Corp. . . . and Fiduciary Asset Management tentatively agreed to a $15.15 million settlement to resolve a class-action lawsuit alleging GD violated its fiduciary responsibilities by allowing Fiduciary Asset Management to charge excessive fees to participants in two GD 401(k) plans."(Pensions&Investments; registration may be required)

Small DC Plans May Need 12b2 Exemption
Excerpt:"A key issue in coming months is whether the [SEC] exempts small defined contribution plans from its proposed rule about moving assets with 12b-1 fees higher than 25 basis points to a share class without an ongoing sales commission . . . ."(PLANSPONSOR.com)

[Guidance Overview] DOL Takes Aim at Hidden Retirement Plan Fees
Excerpt:"It remains difficult for plan fiduciaries to know exactly what many service providers are paid for their services, given the use of revenue sharing and arrangements that charge service provider fees against the investment return of an investment fund. In this context, DOL has issued interim final regulations . . . ."(Kilpatrick Stockton LLP)

[Guidance Overview] Fiduciaries Held Liable for Selecting Retail Mutual Funds
Excerpt:"[S]everal courts are dealing with class action lawsuits claiming that ERISA fiduciaries breached duties of prudence and loyalty by selecting 401(k) investment options with unreasonably high fees and failing to disclose those fees properly to participants. . . . One of these plan fee cases has now been tried . . . and the outcome gives fiduciaries guidance on evaluating and negotiating 401(k) plan fees."(McGuireWoods LLP)

[Opinion] Opinion: Why New Rules for 401(k) Fee Disclosures Dont Go Nearly Far Enough
Excerpt:"Only in the perverse world of the securities industry would candid disclosure of fees paid to vendors be considered a victory. In all other areas of commerce, it's not an issue. How would you feel if your car dealer refused to give you the price he's charging for your car?"(Daily Finance)

[Opinion] Opinion: Nationwide Tosses Its 401(k) Clients Under The Bus
Excerpt:"The trustee plaintiffs seek to certify a class of all trustees of all 401(k) plans that had variable annuity agreements with Nationwide from the first date Nationwide began receiving payments from mutual funds based on a percentage of the assets invested in the funds by Nationwide."(Dan Solin in The Huffington Post)

Principal Unveils Web Site Addressing DOL Fee Disclosure Requirements
Excerpt:"The Principal Financial Group has launched a Web site to help educate advisers and sponsors about the [DOL's] new fee disclosure regulation."(PLANSPONSOR.com)

[Official Guidance] Text of Proposed SEC Regs on 12b-1 Fees (Mutual Fund Distribution Fees) (PDF)
77 pages. Excerpt:"The [SEC] is proposing a new rule and rule amendments that would replace rule 12b?1 under the Investment Company Act, the rule that has permitted registered open-end management investment companies . . . to use fund assets to pay for the cost of promoting sales of fund shares. The new rule and amendments would continue to allow funds to bear promotional costs within certain limits, and would also preserve the ability of funds to provide investors with alternatives for paying sales charges (e.g., at the time of purchase, at the time of redemption, or through a continuing fee charged to fund assets). Unlike the current rule 12b?1 framework, the proposed rules would limit the cumulative sales charges each investor pays, no matter how they are imposed. To help investors make better informed choices when selecting a fund that imposes sales charges, the Commission is also proposing to require clearer disclosure about all sales charges in fund prospectuses, annual and semiannual reports to shareholders, and in investor confirmation statements."(U.S. Securities and Exchange Commission)

Update on DOL Regulations on Fee Disclosure as of August 3, 2010
Excerpt:"The regs are being issued in two parts: First part concerns the obligations of service providers to the fiduciaries; Second part is the obligation of the fiduciaries to the beneficiaries; First part out now, Second part in a few months and they are pending at the White House Office of Management and Budget. [The target page provides links to further information.]"(National Association of Government Defined Contribution Administrators)

[Guidance Overview] New Disclosure Rules for 401(k) Fees Go Into Effect Next Year
Excerpt:"Beginning July 16, 2011, service providers that are paid $1,000 or more from a retirement account must document the direct and indirect compensation they receive in connection with the services they provide."(AccountingWEB)

Administration Costs of 401(k) Plans Often Higher Than 0.25%'Marketing and Service Fee'Limit Proposed by SEC
Excerpt:"Anything above that amount would be deemed an continuing sales charge, which would be limited to the highest fee charged by the fund for shares that have no such sales charge."(Investment News; free registration required)

Form 5500 Schedule C Issues Creating a Potential Rift Between Plan Sponsors and Service Providers (PDF)
2 pages. Excerpt:"Unfortunately, early indications are that there is a difference between what is required to be reported and what will actually be enforced if there is a mistake or misrepresentation. Although the number of specific identification codes has been expanded to 55, and you are supposed to list as many as may be applicable to a specific fee, quite a few codes lack clear definition."(Prime Trust Advisors)

Fees Paid by Bargaining Parties Not Shown on Multiemployer Plans'5500 Schedule C
Excerpt:"Service provider fees are not reported on a multiemployer plan's Form 5500 Schedule C if paid by contributing employers, employer associations or participating unions and not reimbursed from plan assets, according to an information letter issued by [DOL]."(Mercer LLC)

[Guidance Overview] Schedule C: A New Era in Annual Reporting (PDF)
4 pages. Excerpt:"The DOL expanded Schedule C disclosure as the first of a series of three'fee disclosure'regulations intended to improve transparency and to provide plan fiduciaries and plan participants better information on which to base their decisions regarding the selection of service providers and the services they render."(American Society of Pension Professionals&Actuaries via PrimeTRUST Advisors)

Exchange-Traded Funds Not Popular for 401(k) Plans
Excerpt:"Investment advisers like ETFs for a bunch of reasons: They carry lower fees than most mutual funds, offer tax advantages and can trade like stocks. What's more, an ETF price war broke out among big financial firms this spring -- driving expenses and commissions even lower. So why aren't advisers, many of whom consult to corporate retirement plans, pushing to include ETFs in 401(k) portfolios?"(The Wall Street Journal)

Some Retirement Plans Are Replacing Mutual Funds with Lower-Cost'Collective Trusts'
Excerpt:"These alternatives are instruments from banks that are known as collective investment trusts or collective trust funds. They typically have lower expenses than funds, making them attractive to plan overseers and cost-conscious investors, who can see their returns enhanced."(The Wall Street Journal)

[Guidance Overview] Service Provider Fee Disclosure Under ERISA ? 408(b)(2) (PDF)
3 pages. Excerpt:"This Regulatory Brief will provide an overview of the new regulation, including a review of the impacted parties, the information to be disclosed, and Vanguard's approach to compliance."(The Vanguard Group, Inc.)

Judge Pares Fraud Case Involving a Political Consultant and Alleging Corruption in the State Pension Fund
Excerpt:"Prosecutors in the state attorney general's office said that [Hank] Morris and others had schemed to turn New York's $122 billion pension fund into a criminal enterprise. Their efforts netted them tens of millions of dollars in kickbacks from firms investing the fund's money, the indictment said."(The New York Times; free registration required)

[Guidance Overview] Service Provider Fee Disclosure: Another Step Towards Fee Transparency (PDF)
4 pages. Excerpt:"The regulation uses the term responsible plan fiduciary, which means the plan fiduciary in control of the service provider arrangement."(Vedder Price P.C.)

[Guidance Overview] Interim Final Rule on ERISA Plan Service Provider Fee Disclosures (PDF)
Excerpt:"Specifically, . . . in order to satisfy the requirements of the Final Rule, service providers must furnish certain disclosures to the plan fiduciary who is responsible for entering into the contract or arrangement that includes detailed information regarding the services that will be provided and the direct or indirect compensation to be received by the service provider in connection with such services."(Paul, Hastings, Janofsky&Walker LLP)