Use 408(b)(2) to your Employees Advantage By: Sean PattonAIF® 2012.11.28

I read so many articles about how the new DOL fee regulations have struck out with participants. I think many are missing the point; don’t get me wrong, I think it is great employees are getting fee disclosure. However, what is most important is what plan sponsors can do with this disclosure to improve the results on behalf of their employees-- simply benchmarking their plan. Westminster will conduct approximately 40 of these exercises this fall and winter.

In my experience, plan sponsors who go through this formal process will save anywhere from 15-50% in recordkeeping fees. This is where 408(b)(2) can truly impact employees. The savings from this exercise will go directly to their bottom line. The benchmarking is a win-win for all:  the employee who will get better returns towards their retirement savings and fiduciaries who will fulfill their obligations under 408(b)(2).

As an example, we recently assisted a not-for-profit agency in reviewing their fee and services structure with their current provider. This plan sponsor was paying almost 1.50% for recordkeeping. This was a very antiquated group annuity contract and one which had not been reviewed in years. Once the process is finalized, we will be saving employees about $100,000 a year. Real savings like these, over time, can have a significant impact on outcomes for employees.

For more information on this topic, click here to view our presentation from a recent webinar we did with the law firm, Drinker Biddle.

Sean D. Patton

Sean is a Founding Partner of Westminster Consulting, where he currently works with corporate, non-profit and foundation clients.

Sean is involved in the local community through his memberships in Rochester Rotary. He is also the Past-President of the Board of Directors for Camp Haccamo, a Rotary...

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