BY: Victor Hicks, Managing Principal, Lumin Financial
Now, more than ever, employees are asking this question of their benefits manager. In past years, this question was difficult for employers to answer, but with the adoption of the new 401(k) fee disclosure rules [sections 408(b)(2) and 404a-5], employers are now armed with the information to address this issue.
We’ve noticed that employers are unsure as to how to interpret the new disclosure information, or how to communicate it to their employees. As you analyze the disclosure materials provided by your 401(k) service provider(s), consider these helpful tips…
1) SCHEDULE A MEETING (or conference call) WITH YOUR SERVICE PROVIDER
The disclosure materials include much detail, and typically use industry jargon. In order to get a full understanding of “what” the services are, you might need your provider to translate for you.
2) SEEK INPUT FROM A TRUSTED PROFESSIONAL
Your CPA, benefits attorney, or independent investment advisor have a good working knowledge of these issues. They’ll help you determine “reasonableness” of the services and fees, as well as a fee comparison. (note: The DOL website provides a model template for 401(k) fee comparisons)
3) MEET WITH YOUR COMPANY’S LEADERSHIP TEAM
Once you’ve discovered the key issues, the leaders will know the best way to deliver this news to the employees, across the various departments. Help everyone understand that this is a fee “disclosure”, not a fee “increase.” For many, this will be there first exposure to the various layers of investment fees.
Victor Hicks II, CFP is the Managing Principal of Lumin Financial LLC. Lumin is an independent RIA firm, specializing in 401(k) consulting for small and mid-sized companies. He can be reached at email@example.com, or (248) 936-9480.