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Fee Disclosure Rules Increase Complexity in Multi-Provider Environment

July 20, 2012 ( - The litany of challenges related to having multiple retirement plan service providers is well documented.

By PS | July 20, 2012

It creates an environment in which coordinating administrative tasks such as loans, distributions, contribution limits and hardship requests become much more complex and time consuming. And with the new 408(b)(2) and 404(a)(5) fee disclosure regulations, it’s not going to get any easier.  

When you take into consideration some of the requirements associated with the new fee disclosure regulations—like the fact that communication to participants on the subject needs to go out as one document—it’s clear that the data aggregation that needs to occur will be cumbersome to say the least.  

The question that plan sponsors are going to need to ask themselves is: How do I make this work? Of course, simply answering that question in and of itself may not be enough. Why? Because even if they develop a creative solution, they may not have the necessary resources at their disposal to make the solution palatable.  

Over the long-term, the simple solution is to move to a single-provider environment, as that seems to be the direction the 403(b) market is destined toward when other regulations that have been recently established are taken into consideration.   

And while it may be a tough solution to swallow initially, as participant perceptions may view a move to a single-provider environment as a take away, it ultimately may be the best choice for the continued health of the plan, as greater efficiencies, less administrative maintenance and potential economies of scale are gained through this approach.  


David S. Hinderstein, founder of Strategic Retirement Group, Inc.  

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.