Money managers may have to give retirement plan members more information about recordkeeping fees, compliance costs and other plan costs.[@@]
Retirement plan experts talked about the need for tougher plan cost disclosure rules Tuesday at a meeting of the Employee Retirement Income Security Act Advisory Council.
The council gives the secretary of labor advice about how to apply ERISA, a federal law that governs most private, single-company U.S. retirement plans.
- Bruce Ashton, a Los Angeles actuary who represented the American Society of Pension Actuaries, Arlington, Va., emphasized the importance of warning plan sponsors and participants about what on the surface appear to be minor costs.
“Every dollar that goes towards expenses and not into a plan’s investment options potentially represents thousands of dollars in lost retirement benefits,” Ashton said, according to a written version of his remarks. “Over a 25-year period, a participant account that bears expenses of 0.5% would accumulate 28% more in retirement income than a similar plan bearing 1.5%.”
ASPA is recommending that plan administrators give participants a list each year of any fees directly related to the investment options chosen, Ashton said.
ASPA also is recommending that the retirement plan participant statement disclose any indirect costs, such as wrap fees, compliance costs or administration fees.
If a participant statement cannot give account-specific cost figures, it should provide aggregate figures for the entire plan, Ashton said.
ERISA Section 404c already requires retirement plans to disclose some cost information in their summary annual reports and summary plan descriptions, but participants ought to get a full accounting of the plans costs that they pay out of their own pockets, Ashton argued.
One of the biggest money managers, The Vanguard Group, Valley Forge, Pa., submitted writtenc comments arguing that the Labor Department should take an even tougher approach to plan cost reporting requirements.
- Dennis Simmons, a Vanguard lawyer, and Stephen Utkus, head of Vanguard’s retirement research center, are calling for plan statements to use an “all-in fee expense ratio” that includes all direct and indirect plan costs, including service fees as well as asset-based charges.