The General Accounting Office has recommended that the Department of Labor examine the definition of fiduciary to determine if the definition captures the current relationship between sponsors and providers, the GAO discloses in a new report.
The GAO, Washington, unveiled this recommendation in a study conducted to better understand the fees that 401(k) plan sponsors and their participants pay. The study examines the amounts that plan sponsors pay for services and challenges that sponsors face in understanding how fees are charged.
The study, which surveyed 1,000 401(k) plans, additional explores actions the Dept. of Labor has taken to help sponsors better understand and monitor the fees charged by service providers.
In addition to examining the definition of fiduciary, The GAO report recommends that the Dept. of Labor develop more proactive approaches to sponsor educational outreach and improve public access to annual Form 5500 data—401(k) plan information that employers are required to report to the Labor Department and that is provided to plan participants upon request. In response, the DOL “generally agreed” with the findings and will explore ways to implement the recommendations, the report notes.
The report reveals that sponsors of small 401(k) plans generally pay higher fees as a percentage of plan assets than do large 401(k) plan sponsors. The survey notes that the average amount sponsors of small plans reported paying for record-keeping and administrative services was 1.33% of assets annually. This compares with 0.15% paid by sponsors of large 401(k) plans.