The Aug. 30 retirement plan participant fee disclosure deadlinewill come and go with nary a blip on the radar screen, but comeNov. 14, when plan sponsors must release their first quarterlyupdate, the phones could start ringing off the hook.

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The disclosures that are due by Thursday will only add a coupleof columns to a plan participant's usual disclosure documents, butthe Nov. 14 deadline will give them actual dollars and cents thatthey've spent on fees, said Dan Weeks, founder, COO and executivevice president of plan sponsor solutions for San Diego-basedBrightScope.

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The problem with the participant-level fee disclosure is that “nothing in theregulation forces anyone to put anything in context for theparticipants,” he said. The first disclosure plan participantsreceive will look much like the prospectuses they now receive inthe mail so they will “go over their heads.”

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Big plan sponsors, who did their fee disclosure workproactively, have been surprised because they haven't received alot of calls about them, Weeks said. “But it isn't personal yet. Itbecomes personal with the quarterly statement. They could find outthey paid as much in fines as they got in return for theirfunds.”

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A recent report by AARP showed that the majority of people don't believe they arepaying fees on their 401(k) plans. “That's where it gets personal.Right now, it is too much like a prospectus update,” Weekssaid.

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BrightScope's founders believe transparency in the industry wasmuch needed. The whole premise of the company was to help peoplecompare their financial advisors and their retirement plans.

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People can go on the BrightScope website, for free, and enterhow much they are paying in fees. They can then compare those feesto the fees of other plans their size.

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“I think plan sponsors might assume that fee disclosure is notthe issue they thought it was because what is happening in theshort-term is not interesting,” Weeks said. “The quarterly is whereit gets interesting.”

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Laurie Nordquist, executive vice president and director of WellsFargo's Institutional Retirement business, agreed with Weeks thatparticipant disclosure has been a bit of a non-event. The companyhas seen very little increase in the volume of calls in the callcenter.

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“We did see a spike when we sent out a notice to all employeeswho were not participating in the plan,” she said. Instead of just sending out fee disclosures,Wells Fargo added a message directed to employees who are notparticipating in their retirement plan letting them know what theyare missing out on, including an employer match, which is freemoney to them.

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“We did see an increase in calls from those employees and wewere encouraged by that,” Nordquist said.

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Nordquist believes that companies that are not taking advantageof the fee disclosure mailing to try and get employees toparticipate or participate more are missing out on a realopportunity.

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Participants are notorious for receiving prospectus mailings andputting them directly into the trash, without reading them. If feedisclosures look like a prospectus, they won't be read, shesaid.

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Wells Fargo, like most large retirement plan providers, did allthe heavy lifting for its plan sponsor clients when it came toparticipant fee disclosure.

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Wells Fargo's quarterly statement will go out in October.

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“We're not anticipating much of a spike in October, but we willcertainly be ready for it when the calls come in,” Nordquistsaid.

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Guardian Life Insurance also believes that both the 408(b)(2)and participant-level fee disclosures have been uneventful.

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Jason Frain, vice president of 401(k) product management anddevelopment for Guardian Life Insurance, believes that part of thereason too much hasn't happened with plan sponsors regarding the408(b)(2) regulations is because they have been reallyfocused on getting out their Aug. 30 participant-level disclosures.Once they get through this month's disclosure and the Nov. 14,disclosure, then they will begin the long road of benchmarkingtheir plan provider's fees to see if they are paying too much orjust enough for the services being provided.

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“Down the line, we will see a broader review of plans, wherethey are going out and evaluating their fees and doingbenchmarking. The participant-level disclosures haven't heated upyet. Most haven't seen them yet, but there has not been a hugeuptick in calls or questions at this point,” Frain said.

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He added that when participants get their quarterly statements,that will be the thing that opens their eyes for the first time.Guardian historically has included fee disclosures on itsstatements, but now they will be more clear and transparent and ina format that is easier to understand.

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“We're likely to see an additional volume of questions fromparticipants in that time frame,” he said. That's why Guardian wasproactive and built a fee disclosure microsite to help participantsunderstand who the people are that are involved in their 401(k)plans and what their plan fees are paying for.

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“I think [fee disclosure] is a good thing. Anytime plansponsors/participants can get a better understanding of what theyare being paid, I think it is good. What is most important thoughis that plan sponsors and plan participants realize what servicesor value they are receiving for those fees,” Frain said. “As plansdo ultimately go out to benchmark or go out to bid, they have tounderstand what is being delivered to them today. Not all solutionsout there are on an apples to apples basis.”

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The one problem with fee disclosure statements is that theydon't compensate for higher fees translating into higher returns.They are just bottom line fees, said Weeks. The averageperson doesn't understand bonds versus stock or active vs. index.Because index funds have lower fees, there will be a shift to thosebecause fees look like taxes, he added.

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“What they don't know is that this tax is well worth it,” Weekssaid.

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This article was originally posted at BenefitsPro.com, a sister siteof Credit Union Times.

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