Legacy Management Consulting Group LLC Bulletin: Dept. of Labor New Rules for 401(k) Fee Disclosures

Aug. 9, 2010 - PRLog -- The Department of Labor has issued and released new regulation governing fee disclosure and conflicts of interest for 401(k) plans.

"Beginning July 16, 2011, service providers that are paid $1,000 or more from a retirement account must document the direct and indirect compensation they receive in connection with the services they provide" stated Dominick Sartorio, Director of New Business at Legacy Management Consulting Group LLC.

Direct compensation is defined by the Department of Labor as compensation received directly from the 401(k) plan; indirect compensation is received from any source other than the plan sponsor, the covered service provider, an affiliate, or subcontractor. A written description of the services rendered must be included. Adjustments to the fee structure have to be disclosed within 60 days from the date on which the service provider is informed of the changes.

The new regulation is to allow employers and plan participants the ability to figure out what they're paying for their 401(k) plan. Currently, there's no regulation or obligation to disclose any "revenue-sharing" payments extracted from mutual fund families that want to be included as 401(k) investment options for participants. "These payments create an obvious conflict of interest between the adviser , who would want to maximize them, and employees who would want to minimize them" stated Anthony Urbano, Principal at Legacy.

Under the new regulation, full disclosure is now required. "Improving disclosure will mean that plan fiduciaries can make more informed decisions about important plan services, the cost of the services, and the potential conflicts of interest that their service providers may have," Phyllis Borzi, assistant secretary for the Department of Labor Employee Benefits Security Administration, said in a prepared statement.


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U.S. Treasury Circular 230 Notice:  Any U.S. federal tax advice included in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal tax penalties.

The information contained herein was prepared by Legacy Management Consulting Group, LLC from public documents for general informational purposes.  Its contents should not be construed as professional advice, and readers should not act upon the information contained herein without consulting a professional.  This information is presented without any representation or warranty as to its accuracy, completeness or timeliness.  Transmission or receipt of this information does not create any relationship with Legacy Management Consulting Group, LLC.  Electronic mail or other communications with Legacy Management Consulting Group, LLC cannot be guaranteed to be confidential and will not imply nor create any relationship with Legacy Management Consulting Group, LLC.

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