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What is the 408(b)(2) Fee Disclosure? - YouTube
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let's talk about 408 b2 fee disclosures
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a couple years back i had a medical
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consultation and when i got the bill
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there were a couple surprises things
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that i was not expecting
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perhaps you've had this experience or
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something similar to it
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just like my experience with this
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medical bill it's pretty common for
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planned sponsors to have questions as to
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who's getting paid how they're getting
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paid and what they're getting paid to do
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relating to service providers of a
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retirement plan such as an advisor
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tpa record keeper things like that it's
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not uncommon for me to come across
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planned sponsors who don't know how much
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they're paying their service providers
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and what those service providers are
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there to do
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unlike medical bills you physically have
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to write a check or go online and pay
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not only can plan fees come directly out
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of account balances but they can come
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out automatically
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now participant fee notices are given
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out but sometimes
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they aren't all that easy to understand
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on top of this
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participants don't have a say in a lot
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of those fees
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yes they can likely choose the funds
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they want to invest in and the expense
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ratios that are associated with those
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but they don't really cast a vote as to
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who is managing the plan and who the
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record keeper is and who the advisor is
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so you as a planned fiduciary have to
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make decisions that are in their best
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interest
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decisions that you are essentially
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making in behalf of the plan
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participants and their beneficiaries
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this is why 408 b2 fee disclosures are
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so important
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if you've been involved with managing
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your 401k plan
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you may have heard of erisa erisa or the
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employee retirement income security act
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was enacted in 1974 and created minimum
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standards for company sponsored
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retirement plans such as 401ks
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section 408 b2 talks about service
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providers
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disclosures of the services they provide
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and the fees being charged
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so why is all of this so important for
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you as a fiduciary of your plan
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let's jump into some bullet points that
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are directly found on the irs's website
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some of the basic duties of a plan
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fiduciary include quote
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acting solely in the interest of the
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participant and their beneficiaries
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acting for the exclusive purpose of
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providing benefits to workers
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participating in the plan
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and their beneficiaries and deferring
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reasonable expenses
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of the plan carrying out duties with
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care skill prudence and diligence of a
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prudent person familiar with the matters
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unquote these are three of the five
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basic fiduciary duties
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and i think all three of these touch
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base on why
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it is so important to understand
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the fees that are getting charged and
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the services being rendered
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okay so now when you think of 408 b2
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think of
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fee disclosure for services provided
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getting a copy of the 408 b2 fetus
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closure should be pretty easy
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just reach out to your service providers
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and ask for a copy or
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talk to your 401k advisor now to get a
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better idea of what to do with the 408
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b2 fetus closure let's take a trip to
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the grocery store
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you probably have an item that you buy
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on a regular basis
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let's say it's milk you go to the
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grocery store and you see the milk and
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you say
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hey this is a great price you know this
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because you buy the same brand of milk
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at another store or maybe from the same
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store but now it's a little bit less
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but you've bought it enough that you
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understand
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what's a good price and what's not a
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good price you at least have an idea of
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what's
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reasonable now let's use that same
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concept with the 401k
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how do you know if the costs that you're
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paying are reasonable for the services
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you're getting for your 401k
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plan this question is a little more
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difficult to answer because there are a
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lot more factors
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the size of the plan the amount of
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participants
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the services that you've requested all
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of those can make a difference in
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whether or not the costs are reasonable
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but the concept
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is the same as going and buying milk you
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just need a baseline of what is
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reasonable
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and how do you find that out you
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benchmark
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this is one of those areas that a solid
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401k advisor can add a lot of value
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they can help you understand and read
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the 408 b2 fee disclosure
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because sometimes they're pretty easy to
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understand but sometimes it takes a
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little bit more effort
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so they can help you understand that but
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also look at
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independent sources to see how your plan
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compares to other companies in a similar
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industry
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with a similar company size similar plan
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size
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and see where you fall if you're paying
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too much
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look for other providers or see if your
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current provider will lower their fees
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but regardless of what you do make sure
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you have a process
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and you document the reasons for your
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decisions
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i hope this was helpful we have other
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helpful content on our website at
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www.cuiwm.com
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we also have a podcast in your business
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with michael sayer you can also look for
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us
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on social media on twitter on facebook
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and on linkedin and if you want to hear
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more of this or be informed next time we
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get
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more content like this please subscribe
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