A Six Month Reprieve for your Retirement Plan Broker

March 10, 2011by Hoy Grimm0

If you are a retirement plan sponsor or 401(k) plan participant, you may have read that The Employee Benefits Security Administration (a division of the Department of Labor) recently delayed the implementation of the new rules set forth in Section 408(b) 2 by six months to January 1, 2012.  These new fee disclosure rules will require investment advisers, insurance agents and brokers that provide services to a retirement plan to disclose significant information about the retirement plan services they provide to plan sponsors and employers.   This includes providing in writing the description and cost of services provided by the broker/advisor, specific disclosures about plan investments and investment options and whether or not the advisor is acting in the client’s best interest and not their own (fiduciary standard).

The rule was intended to take effect on July 16, 2011, but was delayed to allow plan service providers additional time to prepare for the additional disclosure and oversight that will be required going forward.   The delay is not surprising in this case because this new rule represents a sea change in how 401(k) plan sales and advice is monitored.  Benefit firms, brokerage houses and mutual fund providers will have to increase their compliance efforts to ensure that the proper fee disclosure and fiduciary duties are being met.

With the Dodd-Frank Reform Act addressing the fiduciary standard for all investment professionals (remember our post, Beware the Wolf in Sheep’s Clothing ?), this new rule hones in on the retirement plan marketplace.  This is great news for employers and plan participants as it will clarify not only the fees that they pay inside their plans, but also if they are dealing with a wolf or a sheep.

For more information on LWM’s Fiduciary Plan Services, click here.

Hoy Grimm

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