With the heady rush of health care reform changes, we might be overlooking retirement plans.  I have been writing before about the importance of fees disclosures in retirement plans and it turns out the government has not forgotten about it either.

On July 16, 2010, the DOL further clarified its position that fiduciaries must understand the fees and expenses associated with plans that allow participants to direct their investments and participants must be made aware of them.  Beginning July 16, 2011, a failure to disclose will result in prohibited transaction which in turn triggers excise tax penalties of 15 percent of the fees.

Retirement plan providers are now responsible to make the  disclosure if they reasonably expect to receive $1,000 or more in compensation.  The following persons are entities are required to make disclosures under these regulations:

• Fiduciaries of the plan, including investment managers and anyone else who gives investment advice to the plan for a fee
• Fiduciaries of plan assets in which the plan has a direct equity investment
• Registered investment advisers
• Providers of the plan’s record keeping and brokerage services
• Other service providers, if they receive indirect compensation – including accountants, actuaries, banks, consultants, investment advisors, lawyers and third party administrators.

The service provider is required to disclose, in writing,  the following information BEFORE before providing services:

• A description of the services to be provided
• A statement of the provider’s fiduciary status
• A description of all direct and indirect compensation to be received for covered services
• A disclosure of compensation paid to the service provider and affiliates or subcontractors
• A description of any compensation payable upon termination of the arrangement
• If recordkeeping services are provided, a separate identification of the cost of the services

These fees are normally reported on the plan's 5500 (typically on the schedule C).  The regulations are available here for closer review.  These regs are substantially the same as were originally considered back in 2007, so there should be no surprises.  But plan sponsors and fiduciaries should now be very careful to make sure plan records maintain a full explanation of plan service fees incurred, and also make sure they are accurately reported.