Noting that not all disclosures are the legal responsibility of the recordkeeper, a speaker at an ASPPA Annual Conference session suggested some best practices for drafting service agreements and handling participant fee disclosures for plan sponsor clients.
It is a good practice for recordkeepers to clearly set forth in the service agreement which disclosures they are providing and which they are not accepting responsibility to draft and provide, noted Rick Morgan of Schwab Retirement Plan Services.
While many recordkeeping firms try to assist plan sponsors with their ERISA 404(a) participant fee disclosure (PFD) obligation, the “one size fits all” template that most recordkeepers can provide often does not satisfy all plan sponsor expectations, he noted. One programming alternative that has proven valuable is the availability of “text boxes” that permit plan sponsors (usually via their consultants) to add plan specific language to their PFDs.
To get a handle on how prevalent fee disclosure services are among recordkeepers and how many use the template approach, Morgan used an instant polling app that session attendees accessed in real time. Morgan asked, “Does your recordkeeping firm prepare and deliver participant fee disclosures on behalf of your plan sponsor clients?” The responses of the 150 or so attendees were:
- Yes, but the plan sponsor has little or no opportunity to modify the PFD template we provide: 73%
- Yes, and the plan sponsor has great flexibility in modifying the PFD template: 10%
- No, we do not perform this function on behalf of our clients: 18%
The treatment of PFDs and the importance of including a clarifying provision in the service agreement was part of Morgan’s wide-ranging workshop session on ways to limit recordkeepers’ liability with well crafted service agreements. For a deeper dive into that session, click here.
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