On October 14, 2010 the US Department of Labor released final regulations concerning the disclosures that must be made to every plan participant in participant-directed individual account retirement plans such as 401(k).~end~
The regulation requires plan fiduciaries to give workers:
• Quarterly statements of plan fees and expenses deducted from accounts.
• Cost and other information about investments available under their plan.
• Access to supplemental investment information.
Disclosures must use uniform methods to calculate expense and return information and present it in a format that makes it easier for workers to comparison shop.
This report discusses the implications of these regulations.
Much has been written and discussed about reducing the vulnerability of retirees during retirement but very little about reducing the vulnerability of investment firms when plan participants reach retirement. The history in this area has been to treat this inflection point as a new opportunity for competitors to gather rollover assets from the plan.
This discussion examines the alternative of creating a seamless transition into retirement and eliminating the inflection point for the majority of participants in defined contribution plans.~end~
The seamless transition permits providers to retain participants and assets that are already on the books, without having to compete for them in the form of rollovers. Such an approach reduces the vulnerability at retirement for providers of retirement plan products and services.
The key to this seamless transition is acceptance by plan sponsors. Acceptance is achieved by the protection of the Qualified Default Investment Alternative (QDIA). This powerful safe harbor provides fiduciary relief to plan sponsors who default any non-electing employees into a qualified investment.