Fee Disclosure Reveals 401(k) Fiduciary

In case you missed it, your 401(k) provider should have provided you, the business owner, with a fee disclosure notice by July 1st.  Participants should have received a seperate notice 60 days later.

As I said in one of my last blog posts, I think all of this fine print missed the mark.  Most people still do not understand how much they pay for the 401(k) plan.  But I do see one useful item in the disclosure notice:  fiduciary status.

As the Plan Sponsor you are considered a fiduciary.  You are legally obligated to place the interests of your plan participants above all else.  The real surprise for most people is that your 401(k) advisor may not be held to the same high legal standard.  Many advisors are governed by a lower suitability standard.  This means that the advisor can look at two different 401(k) products and sell you the more expensive one if it pays them more in commissions.  The 401(k) is “suitable” even though  it costs plan participants more.

In the Plan Sponsor Fee Disclosure notice there is a section that is titled Fiduciary Status.  My firm’s disclosure reads in part:

“Safe Harbor Investment Advisors LLC, is acting as a fiduciary of the Plan under both the Employee Retirement Income Security Act (“ERISA”) and as a registered investment adviser under the Investment Advisers Act of 1940 and the laws of the state of Maryland.”

It’s time to check that fee disclosure notice and see if your 401(k) advisor is willing to put their fiduciary status in writing and your best interests above their own.

What does your fee disclosure notice reveal?