Fee Disclosure Requirements

Tricia Cage
Vice President, Senior Retirement Plan Consultant

Bill Karbon
Vice President, Director of Compliance

October 13, 2011

What Will We Cover?

Overview of Plan Sponsor Fee Disclosures
Overview of Participant Fee Disclosures

Plan Sponsor Fee Disclosures

Plan Sponsor Fee Disclosures

Originally effective July 16, 2011, changed to January 1, 2012, changed again to April 1, 2012
Covered Service Providers (CSPs) required to provide Disclosures about certain Compensation received with respect to services provided to Covered Plans Failure to meet requirements results in prohibited transaction subjecting service provider to 15% excise tax and possible need to disgorge fees
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Plan Sponsor Fee Disclosures

Covered Service Provider (CSP):
One who enters into contract or arrangement with the plan Expects to receive more than $1,000 in compensation Compensation is received by the CSP, an affiliate, or a subcontractor in connection with the provision of services by the CSP, an affiliate or a subcontractor
CANNOT avoid rules by having another entity perform the services or get the compensation

Plan Sponsor Fee Disclosures

Regulations do NOT apply if:
CSP service contract is with the plan sponsor, and not the plan and CSP is paid only by the plan sponsor and CSP gets no direct or indirect payments from the plan

Plan Sponsor Fee Disclosures

Service covered:
Services provided as a fiduciary or RIA Recordkeeping or brokerage services Other services
Accounting Auditing Actuarial Consulting Custodial Insurance Investment Advisory Legal TPA
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Plan Sponsor Fee Disclosures

Covered Plan:
ERISA-covered retirement plans Expected to be expanded to apply to health and welfare plans Does NOT apply to:
SEPs SIMPLE IRAs IRAs

Plan Sponsor Fee Disclosures

Reportable Compensation:
Anything of monetary value
Only includes nonmonetary compensation if over $250 during term of arrangement

Compensation received directly from plan Indirect compensation

Received from third party Services performed under arrangement between plan and CSP Bonus / override payments

Plan Sponsor Fee Disclosures

Fiduciary Service Disclosures:
Description of fiduciary services provided If applicable, statement that CSP, affiliate or subcontractor (Provider) will provide services as a fiduciary If applicable, statement that the Provider will provide services to the plan as an investment advisor under the 1940 Act or any State law

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Plan Sponsor Fee Disclosures

Manner of Disclosure:
Must be written May use DOL electronic delivery rules Can come from different sources

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Plan Sponsor Fee Disclosures

Disclosure of Compensation Information:
Monetary amount Formula Percentage of plan assets Per capita charge per participant Any other reasonable method

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Plan Sponsor Fee Disclosures

Timing of Disclosures:
Reasonably in advance of the date the contract is entered into, extended, or renewed Exception
If investment vehicle is not known at the time the contract is entered into, must provide information not more than 30 days after provider knows that the vehicle will be used

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Plan Sponsor Fee Disclosures

Timing of Change to Disclosures:
As soon as practicable, but not later than 60 days from the date on which the CSP knows of the change

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Participant Fee Disclosures

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Participant Fee Disclosures

According to DOL
There are estimated to be 483,000 participant-directed individual account plans 72 million participants $3 trillion in assets

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Participant Fee Disclosures

Effective no later than the later of:
60 days after the plans anniversary date that occurs on or after November 1, 2011 or 60 days after the effective date of the plan sponsor fee disclosure rules (April 1, 2012)

Applicable to defined contribution plans

Plan must be subject to ERISA Plan where participant has right to direct the investment of assets held in, or contributed to, his or her individual account

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Participant Fee Disclosures

Plan Disclosures
Annual Disclosures
Plan information Expenses (Administrative and Individual)

Quarterly Disclosures
Amount of administrative expenses Amount of individual expenses

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Participant Fee Disclosures

On annual basis, must disclose following plan info:
Explanation of the circumstances under which participants and beneficiaries may give investment instructions Explanation of any specified limitations on such instructions under the terms of the plan, including any restrictions on transfer to or from a designated investment alternative Description of or reference to plan provisions relating to exercise of voting, tender and similar rights appurtenant to an investment in a designated investment alternative as well as any restrictions on such rights Identification of any designated investment alternatives offered under the plan Identification of any designated investment managers Description of any brokerage window
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Participant Fee Disclosures

Two types of individual expenses
Administrative
Fees for general plan administration charged against accts (and not reflected in annual operating expenses of investment vehicle). For example:
Legal Accounting Record keeping

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Participant Fee Disclosures

Two types of individual expenses
Individual
Fees actually charged against individual account for services to individual (rather than on plan-wide basis and not reflected in annual operating expenses of investment vehicle).For example:
Plan loans, QDROs Redemption fees, sales/loads Investment advice Brokerage windows Similar services charged on an individual basis (e.g. distribution fees)

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Participant Fee Disclosures

General Administrative Expenses:
Explanation How allocated (pro rata, per capita)

Individual Expenses
Explanation

Does not include expenses reflected in an annual operating expenses of designated investment alternative Does not require dollar amount in annual statements

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Participant Fee Disclosures

ERISA Plan Administrator (ERISA 3(16)) must give the disclosure
Plan Administrator not liable for completeness and accuracy of information if:
Information received from or provided by service provider or issuer of investment; and Acted reasonably and in good faith

Disclosure goes to each participant that, pursuant to the terms of the plan, has the right to direct the investment of assets held in, or contributed to, his or her individual account
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Participant Fee Disclosures

Updates for changes:
Not less than 30 days and no more than 90 before the effective date of ANY change to the information, each participant and beneficiary shall be furnished a description of such change
Exception for unforeseeable events or circumstances beyond plan administrators control, if so, then as soon as reasonably practicable

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Participant Fee Disclosures

Quarterly expense disclosures:
Administrative expenses:
Dollar amount actually charged during the preceding quarter to the participants account for administrative services; Description of the services provided to the participant or beneficiary for such amount; and If applicable, an explanation that some of the plans admin. expenses for the preceding qtr were paid from the total annual operating expenses of one or more of the plans designated investment alternatives (e.g. through revenue sharing.

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Participant Fee Disclosures

Quarterly expense disclosures:
Individual expenses
Dollar amount actually charged during the preceding quarter to the participants account for individual services Description of the services provided to the participant or beneficiary for such amount

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Participant Fee Disclosures

Investment Disclosures
Annually, regulations require that information on investment alternatives be presented in a comparative format such as a chart or similar format that includes:
prominent display of the date; Statement that additional investment information (including more current performance information) is available at the listed web addresses (it appears there is no obligation to update other than annually); Statement of how to request paper copies free of charge.

Sample chart provided in an appendix to reg.

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Participant Fee Disclosures

Investment Disclosures Information Provided Automatically
For each designated investment alternative, must include:
Identifying information Performance data/benchmarks Fee information Web site

Glossary Other mandatory statements Special disclosures for annuity investments Special rules for employer securities
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Participant Fee Disclosures

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Participant Fee Disclosures

Investment Disclosures Fee Disclosures
Commissions Sales loads Sales charges Deferred sales charges Redemption fees Surrender charges Exchange fees Account fees Not included in annual operating expenses

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Participant Fee Disclosures

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Participant Fee Disclosures

Web site Information
Sufficiently specific to provide participants access to the following Information for each designated investment alternative:
the name of the investments issuer or provider, objectives or goals (consistent with SEC Form N-1A or N-3) the investments principal strategies and attendant risks, the assets comprising the investments portfolio, the investments portfolio turnover, the investments performance and related fees and expenses

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Contact for more information

Tricia Cage, CRPS, RPA, CEBS, AIF
VP, Senior Retirement Benefits Consultant CBIZ Insurance Services, Inc. 9755 Patuxent Woods Drive, Suite 200 Columbia, MD 21046 Direct: (443) 259-3211 Fax: (855) 288-0215 tcage@cbiz.com

Bill Karbon, MSPA, CPC

VP, Director of Compliance CBIZ Insurance Services, Inc. 1009 Lenox Drive, Suite 105 Lawrenceville, NJ 08648 Direct: (609) 895-5332 Fax: (609) 896-1849 wkarbon@cbiz.com 33

Questions

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