Fire Starters – New Disclosure Rules for Employer Sponsored Plans

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By Cary Boring and Claudia Sawaf
Trilogy Financial Services, Inc.

In 2010, the Depart of Labor (DoL) issued several proposals and final regulations concerning employer sponsored retirement plans. Failure to comply with these regulations could start a fire that would be hard to put out and leave plan fiduciaries personally responsible.

Who is a Fiduciary?

Many of the actions involved in operating a plan make the person or entity performing them a fiduciary. Using discretion in administering and managing a plan or controlling the plan’s assets makes that person a fiduciary to the extent of that discretion or control. Thus, fiduciary status is based on the functions performed for the plan, not just a person’s title.
Specific fiduciary duties include:

  1. Act for the exclusive benefit of participants and beneficiaries.
  2. Pay only reasonable plan expenses.
  3. Carry out duties prudently.
  4. Diversify Plan Investments
  5. Adhere to the terms of the plan’s documents.

Fiduciaries that do not comply with these regulations may be personally liable for restoring any losses that were caused from the breach. New disclosures to be introduced by January 1, 2012 will consist of:

Service Provider Fee Disclosures. Retirement plan service providers must disclose fees charged for the services to the fiduciaries that will allow them to assess the fees and deem them either reasonable or not within guidelines. Fiduciaries will need to review the information in order to stay within compliance of ERISA rules.

Participant-Directed Plan Fees and Investment Disclosures. 401k participants must be given adequate information regarding the fees and expenses concerning the investment options. Fiduciaries must follow new specific steps in order to meet the ERISA regulations concerning the transparency for investment and plan costs.

Target Fund Disclosures. Fiduciaries will now have to offer more detailed information regarding target date funds.

In order to stay in compliance we recommend regular independent and objective plan reviews conducted by a qualified Third Party Administrator and Financial Planning Firm. Costs are usually minimal and in some cases complimentary. Please also see the Fiduciary Checklist available for valuable information to assist you with the changing landscape of ERISA regulations.

Article provided by Cary Boring & Claudia Sawaf, Trilogy Financial Services, Inc. Securities and advisory services offered through National Planning Corp (NPC) Member FINRA, SIPC and a Registered Investment Advisor. Trilogy Financial Services, Inc. and National Planning Corporation (NPC) are separate and unrelated companies.

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