Retirement Savings: Better Information and Sponsor Guidance Could Improve Oversight and Reduce Fees for Participants

In 2012, the Department of Labor stated that it has issued two fee disclosure regulations that it believes will help plan sponsors decrease participant fees by helping them to better understand, negotiate, and monitor the plan fees and expenses that are borne by participants and beneficiaries. First, Labor published a final regulation in 2010 under ERISA section 404 requiring that employers and other plan administrators disclose information about plan investments, fees, and expenses to certain workers. In 2012, the Department published the final regulation under section 408(b)(2) of ERISA requiring covered service providers, such as recordkeepers and brokers, to disclose to pension plan sponsors the services they provide, information on direct and indirect compensation they will receive, and, for certain covered service providers, information regarding certain expenses associated with plan investment options. Labor also planned to separately publish a proposed amendment that may require covered service providers to supply plan fiduciaries with a guide or similar tool to assist fiduciaries in quickly locating the required disclosures. The Department reported that it is working this project through the necessary clearance channels for submitting the proposed 408(b)(2) amendment to OMB. The final version of this amendment will likely be a significant step forward in helping plan sponsors to cost-effectively decrease participants' fees. In addition, in 2012, IRS stated that it provided a link to Labor's web site containing materials that would help plan sponsors learn about fees. In FY13, the final rule passed and EBSA confirmed that it will be implemented this year.

In 2012, IRS added a link to the Department of Labor's web site to refer information-seekers to potentially fee-reducing information. The link - posted on IRS' "Site Map - Retirement Plans Community" web page - takes viewers to Labor's main page. Links to more specific Labor guidance or Labor web pages designed for retirement plan sponsors would further enable sponsors to locate information that may help reduce fees for participants. Labor stated that it has issued two fee disclosure regulations that it believes will help plan sponsors decrease participant fees by helping them to better understand, negotiate, and monitor the plan fees and expenses that are borne by participants and beneficiaries. First, Labor published a final regulation in 2010 under ERISA section 404 requiring that employers and other plan administrators disclose information about plan investments, fees, and expenses to certain workers. In 2012, Labor stated that it published the final regulation under section 408(b)(2) of ERISA requiring covered service providers, such as recordkeepers and brokers, to disclose to pension plan sponsors the services they provide, information on direct and indirect compensation they will receive, and, for certain covered service providers, information regarding certain expenses associated with plan investment options. Labor will separately publish a proposed amendment that may require covered service providers to supply plan fiduciaries with a guide or similar tool to assist fiduciaries in quickly locating the required disclosures. This rule was finalized and, in FY13, EBSA confirmed that it will be implemented.

Consistent with our recommendation, IRS changed a form to collect information employer type. Employers submit the W-3 form along with the W-2. In 2012, IRS began collecting information in the W-3 to distinguish between 457 governmental and 457 tax-exempt plans.