Preparing for the Retirement Plan Disclosure Regulations: Is Your Business Ready for the Changes?

August 1, 2012

By David Chrestensen | June 2012

CINCINNATI | Earlier this year, I shared the importance of understanding the Department of Labor’s (DOL) retirement plan fee disclosure regulations, the timing and implications. TheDOL is ready to make serious changes and shine a bright light on the opaque industry. The good news is that plan sponsors who want to do the right thing for theirbusiness and employees will now have the transparency needed and a recent courtruling to help guide their decisions.

Tussey versus ABB, Inc.

With implementation taking place later this summer, the upcoming disclosure regulations are certainly causing concern among retirement plan providers. In fact, arecent ruling by the U.S. Federal District Court for the Western District of Missouri (Tussey v. ABB, Inc., 2012 WL 1113291) found that the plan fiduciaries breachedtheir fiduciary duty by failing to monitor recordkeeping cost, negotiate rebates and prudently select and retain investment options.

It is safe to say that most business owners want plans that offer the best investment opportunities for themselves and participating employees at the most reasonable cost. In other words, they want value.

However, with the industry practice of bundled products and hidden fees, value is hard to ascertain and often not delivered. For this reason, the DOL is focusing its efforts on removing the uncertainty associated with cost, performance and service in the retirement product and service industry. The court decision in the Tussey case and the recently released Field Assistance Bulletin (available at indicates that the DOL is serious about holding the retirement services industry accountable and ensuring the products are more transparent.

The Impact on Business Owners

A significant portion of retirement plan disclosure requirements falls on the shouldersof plan sponsors, typically business owners. Unfortunately, many are unaware oftheir role as it relates to the disclosure deadlines. Business owners need tounderstand that the potential liability is significant, but can be easily avoided throughearly action that is neither time consuming nor costly.

Key points to keep in mind moving forward:

  • By law, all retirement plans must have a “named” fiduciary shouldering theresponsibility for six key ERISA compliance areas and nearly 20 differentoperations within a retirement plan.
  • By practice, most plans have the plan sponsor (in many cases, it is the business owner), often unknowingly, assuming that role and concurrently the liability for errors in judgment or operation within those different areas.
  • However, by operation, it is possible to move key aspects of the ERISA compliance exposure onto a discretionary fiduciary, and therefore structurally mitigate liability for the plan sponsor.

There’s no doubt that the changes will create a consistent standard across the industry and in the end, will greatly benefit business owners and their employees. To ensure you understand your plan’s costs, fees, features and service provider relationships, schedule a time to meet with your financial provider today.

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