BEST PRACTICES: Monitoring and Disclosure of Fees for Defined Contribution Plans Flashcards
Plan sponsors should make sure that DC plan costs are reasonable and appropriate, compared with plans of similar size, structure, and service levels, and that they provide plan participants with meaningful and accessible information about fees and expenses.
What is the primary responsibility of sponsors of state and local government DC plans?
To make decisions in the best interests of plan participants and beneficiaries, ensuring costs are reasonable.
What kind of scrutiny have the fees paid by DC plans attracted?
Congressional, regulatory, and public scrutiny.
Which U.S. department has issued rules about the disclosure and transparency of fees charged to DC plans and participants?
The U.S. Department of Labor (DOL).
How often should plan sponsors reevaluate their fee disclosure practices?
Regularly, to assure compliance with applicable state and federal regulatory requirements and best practices.
What should plan sponsors review and verify at least once a year regarding DC plan service providers?
Actual fees to make sure the provider is not overcharging.
What is recommended if a plan sponsor wants to ensure competitive fees for their DC plan?
Consider issuing a Request for Proposal (RFP).
How can plan sponsors monitor potential conflicts of interest with service providers?
By monitoring service providers at least once a year or when there is a material change in circumstances.
What type of information should be provided to plan participants about fees and expenses?
Meaningful and accessible information, including the role fees play in investment returns, disclosed at least once a year.
How should fee-related information be communicated to non-investment personnel?
In a way that is easy to understand, possibly through annual statements with personalized fee disclosures.
What additional disclosures might participants need to evaluate investment products offered?
Past investment performance, risk and investment objectives, and appropriate fee benchmarks for each investment category.
