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A retirement plan fiduciary must act to defray “reasonable expenses of administering the plan”. In addition they may contract a party in interest for services “if no more than reasonable compensation is paid therefor”. (Title 29 §1104(a)(1)(A)(ii))

These duties have been law since the enactment of ERISA in 1974. Due to both the lack of clarity on the definition of “reasonable” and the difficulty in obtaining appropriate information, most plan fiduciaries have swept this responsibility under the rug. The good news is that beginning April 1, 2011, all parties receiving compensation from retirement plan assets must report that compensation to the applicable plan fiduciary.

 Part III: Advanced planning can mitigate discontent

 In Part I and II of this series, I discussed how the new participant fee disclosure regulations under §404a-5 will cause increased confusion among participants without necessarily improving the participants’ investment decision making process. In summary, the regulation is intended to give participants investment expense and performance information so they make better investment decisions. The unintended consequence of the regulation will cause participants in some plans to remain clueless as to the true cost of sponsoring a retirement plan and others with a discernable layer of expenses, fully disclosed, and although potentially less costly than the bundled alternatives, confused as to why they are necessary.