Know your fees. Know if your fees are reasonable.
Protect your plan.
The Department of Labor (DOL) requires that 401(k) plan sponsors review all service provider disclosures to confirm that their current arrangements are “necessary and reasonable.” Evaluating these complex arrangements is a difficult task for plan sponsors. Many choose to outsource the process to individuals or companies, like us, trained in the specific process.
The CEFEX Service Provider Disclosure Review
The CEFEX Service Provider Disclosure Review is a formal written assessment which provides an impartial perspective on your service providers and validates whether or not your plan is operating in compliance with fee disclosure regulations under ERISA 408(b)(2). Additionally, the assessment addresses the qualitative shortfalls of benchmarking alone and provides a means for plan sponsors to make a formal determination of “fee reasonableness.”
This process answers questions like:
Disclosures: Do disclosures conform to ERISA 408(b)(2) requirements?
Service Descriptions: Are all the services fully described? Are they being delivered?
Compensation: Are all forms of direct and indirect compensation properly disclosed?
Fiduciary Status: Is the provider a fiduciary?
Conflicts of Interest: Does the provider have any potential conflicts of interest?
Benchmarking: How do fees stack up to other plans?
Upon completion of the assessment, CEFEX will issue a Registered Opinion Letter (“ROL”), which provides a detailed evaluation of your plan’s service provider disclosures, identifying those which comply with the 408(b)(2) regulations.
If your assessment is not in compliance, a registered letter will be sent to the plan representative with suggestions of changes which will need to be made before issuance of the ROL. Once the ROL is issued, the responsible plan fiduciary must affirm its agreement with the findings before a legal opinion will be issued to the plan by an ERISA attorney, stating that the plan has taken the required steps to select service providers in compliance with DOL regulations, 2550.408b-2(c).
1. Base fee (billed/invoiced by CEFEX) for up to 3 covered service providers
2. Each additional covered service provider
3. Each affiliate/sub-contractor
4. Legal Opinion
5. Miscellaneous: charges in #3 include payments to FINRA licensed registered reps in a bundled separate account program through an insurance company or priced into various, mutual fund multiple share classes. Multiple self-directed brokerage options each incur the $250 charge
The entire fee is billed upfront as $3,500 in the standard situation; however, the plan sponsor is free to seek their own legal counsel for the legal opinion. Our informal survey of what opinion letters on this subject cost vary greatly depending on where the plan sponsor resides, however, can range from as low as $3,000 to up in excess of $10,000.
Ready to get started? Contact us to learn more about the Service Provider Disclosure Review.