The federal
Requirements call for plan sponsors to report any indirect compensation they receive from fund companies to the federal authorities, for service providers to report to plan sponsors any indirect compensation they receive, and for plan participants to receive information about both.
Critics say such rules generate a barrage of paperwork, but deliver few benefits to participants.
“It’s going to require a lot of information to be tracked and disclosed that’s not being tracked [or] disclosed consistently,” said Ellen Goodwin, an attorney with the
“The important thing is: The plan fiduciary has to be aware of all compensation that’s coming to their service provider as a result of services to the plan,” said a DOL official.
The problem is that advisers to a 401(k) plan cannot accept other fees, sometimes for marketing or in commissions, that reduce returns to investors.
Those fees must be refunded. But separating them out becomes a complex process, especially in open architecture programs.
The question is then whether to refund the fees to the cost of administering the plan to the sponsor, or only to the investors whose portfolios were affected.
If the decision is to refund participants, the challenge is then finding efficient software that makes it possible.
“Most systems weren’t built with this system in mind to track finders’ fees,” said Mark Gutrich, president and chief executive of
Ed Ferrigno, vice president of the
“The easiest way to drive it back home to the individual accounts is not to charge them in the first place,” he said.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
