SOURCE: Security Benefit

Security Benefit

August 30, 2012 11:53 ET

Security Benefit Sounds Alarm on Impact of New 401(k) Fee Disclosure Rules

Firm Says Unintended Consequences Could Harm Millions of Small Plan Participants

TOPEKA, KS--(Marketwire - Aug 30, 2012) - Executives at Security Benefit Corporation, a Guggenheim Partners Company, are cautioning business owners and 401(k) plan participants to avoid a 'fee race to the bottom' as Department of Labor's (DOL's) new disclosure rules take effect.

Specifically, the firm's retirement plan experts are concerned that the DOL's new rules will lead to an outsized focus on cost at the expense of value.

The major thrust of the new requirements, which apply to ERISA-covered 401(k), 403(b) and profit sharing plans with participant-directed investments, is getting plan providers to understand the services received from providers and to determine the reasonableness of the costs incurred, as well as providing more detail about administrative fees to participants.

According to Kevin Watt, Senior Vice President of Security Benefit's Defined Contribution group, simply pursuing the lowest cost is a real risk for small plan providers, which account for 90% of the nation's 401(k) plans.

"There's no argument that the ability to easily see costs will prove invaluable to plan participants," says Watt, "but reasonableness means a lot more than cheap. Simply focusing on the lowest cost could result in a race to the bottom for the small-plan market, which has the potential to turn out badly for millions of plan participants."

The first round of the DOL's fee disclosure rules kicked off on July 1, and those rules require service providers to disclose compensation they receive, which may enable sponsors to make direct comparisons of the cost of services among various providers. But according to Watt, the smaller plans of everyday Americans -- far and away the largest and fastest growing segment of the DC market as a percentage of all plans -- need more than an 800 number and a website.

"A low-priced plan that generates poor results is no substitute for professional advice," says Watt. "Just ask workers who received help during the years around the financial crisis -- they ended up with investment returns that were nearly three percentage points higher than those who did not."

The second round of the DOL's rules take effect August 30, when employers are required to begin providing plan participants their initial fee disclosure statements showing what fees various investment options in their retirement plans entail. Watt believes this event will provide a significant opportunity for good advisers to interpret all this information for their plan sponsor clients with an eye toward outcome, not just cost.

"The real worth of an employer-sponsored plan is found in a successful retirement outcome for its participants," says Watt, "which is why a financial adviser who knows how to work with a 401(k) plan sponsor is so important. A well-run retirement plan is a tangible benefit for any small businesses looking to attract talent in today's competitive marketplace."

Security Benefit, a leading provider of retirement savings and income vehicles for America's pre- and post-retirees, focuses exclusively on employer-sponsored and individual retirement plan arrangements and partners with licensed and appointed financial planners around the nation. The firm's recently-launched Security Benefit SecurePoint Retirement(SM) 401(k) product provides advisers the expertise of Mesirow Financial as an ERISA 3(38) fiduciary.

"It's absolutely critical that before the RFPs start going out, participants need to know what they give up for stripped-down, low-cost plans," says Watt.

About Security Benefit Corporation
Founded in 1892, Security Benefit Corporation, a Guggenheim Partners Company, is a leading provider of savings and income solutions for America's pre- and post-retirees. Security Benefit Corporation targets multiple wealth segments and channels of distribution through an independent, merit-based distribution structure. By leveraging Guggenheim's superior general account management capabilities into highly competitive products, Security Benefit Corporation focuses on the retirement savings market providing a full range of services to independent distributors including broker/dealers, IMOs, and other financial service providers. Security Benefit is indirectly controlled by Guggenheim Partners, LLC. To learn more about Security Benefit, visit

Mesirow Financial is an unaffiliated third-party. For more information about Mesirow Financial, visit its Website at

For more information about SecurePoint, call 1-800-888-2461. 

The Security Benefit SecurePoint Retirement(SM) 401(k) and 401(a) products are Trust Accounts under §401 of the Internal Revenue Code. The SecurePoint Retirement 403(b)(7) ERISA product is a Custodial Account under §403(b)(7) of the Internal Revenue Code. The SecurePoint Retirement 457(b) Tax Exempt product is a Trust Account under §457(g) of the Internal Revenue Code.

Services are offered through Security Distributors, Inc. ("SDI"), a subsidiary of Security Benefit Corporation ("Security Benefit"). Security Benefit Corporation, its affiliates and subsidiaries, are not affiliated with fi360.

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