Prepare For Misunderstandings About New Retirement Plan Fee Disclosures
Even if your credit union and/or your retirement plan provider has been communicating with plan participants in advance of this change, be ready to answer questions once the fee information is actually published.
August 30, 2012, is the effective date for providing initial disclosures to participants in calendar-year plans or plan years that started November 1, 2011. For plan years with an October 1, 2012 effective date, the deadline for the initial disclosure is February 28, 2013. (For more information about effective dates and details about the new regulations, use the links provided below.)
Fees aren’t new, and they pay for valuable services
Although some plan providers, such as CUNA Mutual Group, have been making fee information available for years, the new requirements for disclosures will inevitably bring plan fees to many participants’ attention for the first time. And, understandably, employees may believe the fees are new or higher.
Beyond explaining that the fees aren’t new, it will be important to help participants understand the value they’re getting in return for the fees. Points to emphasize include:
• Fees are standard in the retirement plan and investment industries. They pay for a retirement plan’s administrative expenses and infrastructure. For example, for a plan provider, fees help pay to create and maintain Web services that allow participants to get up-to-date data about their plans, research plan options, make changes, etc. Plan providers must also track and adjust to new laws and regulations, and continually assess the performance and compliance of investment funds.
• Participant fees are not the total cost of providing and maintaining retirement plans. Give participants a breakdown of which fees participants pay and which are paid by the credit union. In fact, this may be a good time to remind employees about the total cost of their benefits.
• Some fees apply to all participants in a plan, but some are for specific services such as the processing fee for withdrawals.
• Regarding the fees for individual investment funds: Higher fees aren’t always a worse option. Some funds make the most sense