IRS Regulation 408(b) is expected to take affect in early 2012. Retirement educator Eric Roberts will present the 10 questions you should be asking your defined contribution plan vendor that will help you understand the actual fees and costs associated with your current benefit. Knowing what to ask is half the battle. All attendees of the program will receive Nyhart’s 408(b)2 Guide that includes a checklist of fees to look for and disclosure statements you should be get from your vendor to affirm the actual costs of your plan in preparation of the new regulations taking effect.

1. 10 Questions
www.nyhart.com
Presented by Eric Roberts, RIA
Copyright 2011. All Rights Reserved.
What to Ask Your 401(k) or 403(b)
Vendor to Get Fee Transparency

2. Eric Roberts
Fiduciary Consultant
eric.roberts@nyhart.com | (317) 845-3511
Qualifications or certifications:
Accredited Retirement Plan Consultant through The
Society of Professional Asset-Managers and
Recordkeepers and Series 63 and 65 designations..

3. What 10 questions should you be asking
your defined contribution plan vendor
that will help you understand the actual
services, fees and costs associated with
your current benefit?
408(b)(2) takes affect April 1, 2012.
3

4. What is
ERISA § 408(b)(2)?

5. Defined Contribution (i.e. 401(k), ERISA 403(b))
and Defined Benefit Pension plans. Excluded from
this definition:
• IRAs
• Simplified employee pensions, and
• Simple retirement accounts.
Covered Plans

6. Q. Are you a covered service provider?
The service provider must reasonably expect to receive $1,000 or
more of compensation, direct or indirect, for providing covered
services.
This applies even if the services or compensation will be received by an
affiliate or subcontractor.
6Question 1 of 10

7. Q. What services do you provide to the plan?
Covered services include the following:
1.) Fiduciary services, including:
• Those provided directly to a plan as a fiduciary.
• Those provided as an investment adviser registered under the
Investment Advisers Act of 1940 or comparable state law.
• Those provided as a fiduciary to an investment contract, product or
entity that holds plan assets and in which the plan has a direct equity
investment (this does not include managers of mutual funds).
7Question 2 of 10

8. Q. What services do you provide to the plan?
Covered services include the following:
2.) Recordkeeping or brokerage services provided to a participant-directed
individual account plan, i.e., a 401(k) or ERISA 403(b) plan, if the plan
makes one or more designated investment alternatives available.
8Question 2 of 10

9. Covered services include the following:
3.) Other services for indirect compensation. This includes indirect
compensation received by the provider of the service, as well as affiliates
and subcontractors.
The list of services is very broad and includes banking, consulting, custodial,
insurance, investment advisory, recordkeeping, securities or other
investment brokerage, third party administration and various professional
services.
9
Q. What services do you provide to the plan?
Question 2 of 10

10. Q. Are you a fiduciary to the plan?
If the covered service provider is a fiduciary to the plan, we believe that a
well crafted Fiduciary Acceptance and Acknowledgement Form that
comprehensively covers fiduciary roles and responsibilities may be the
most valuable engagement document in a service provider’s arsenal.
Equally as important, is the person employed by the company / plan
sponsor who is the “responsible fiduciary”. This person has the authority
to cause the plan to enter into, or extend or renew, the contract or
arrangement.
The covered service provider must know who the responsible fiduciary is
so that all disclosures, etc. are provided to this person.
10Question 3 of 10

11. Q. What is direct and indirect compensation?
Direct compensation
Compensation received directly from the plan or plan sponsor.
Indirect compensation
Compensation received from a source other than the plan, plan sponsor,
the covered service provider or an affiliate or subcontractor in connection
with the services arrangement.
This generally includes fees received from an investment fund, such as 12b-
1 fees, or from another service provider, such as a finder’s fee.
11Question 4 of 10

12. Q. How will your compensation be disclosed?
Disclosure of all direct and indirect compensation that the service provider, an affiliate or
a subcontractor expects to receive from the plan must be disclosed.
In the case of indirect compensation, the service provider must identify the services for
which the indirect compensation will be received as well as the payer of the indirect
compensation.
• Format: May be expressed as a dollar amount, formula, percentage of covered plan
assets, a per capita charge, or by any other reasonable method that allows a plan fiduciary
to evaluate the reasonableness of the comp.
• Manner of Receipt: Disclosure must include a description of the manner in which the
compensation will be received, (i.e., billed or deducted directly from participant’s
accounts).
• Transaction-Based Fees: Compensation set on a transaction basis (i.e., commissions
or soft dollars) or charged directly against the plan’s investment (i.e., 12b-1 fees) and paid
among the covered service provider, an affiliate or a subcontractor must be separately
disclosed.
12Question 5 of 10

13. Q. What special rules exist for record keepers?
One who provides recordkeeping services must provide a description of
the direct and indirect compensation that the service provider and its
affiliates and its subcontractors expects to receive for its services.
If there’s no explicit fee for recordkeeping services, a reasonable, good
faith estimate must be provided. The estimate may take into account the
rate that the service provider would charge to a third party or prevailing
market rates for similar services.
Disclosing a de minimus amount when the amount has no relationship to
cost will not be regarded as reasonable.
13Question 6 of 10

14. Q. What rules exist for platform providers?
Recordkeepers and brokers that make designated investment alternatives available must
provide basic fee information for each such alternative for which recordkeeping or
brokerage services are provided. This is in addition to information regarding their own
compensation.
The information includes the expense ratio, ongoing expenses (i.e., wrap fees), as well as
transaction fees (i.e., sales charges, redemption fees, and surrender charges) that may be
charged directly against the amount invested.
• Pass-through of information on investment products. Disclosure obligations for
unaffiliated mutual funds may be satisfied by passing through the fund prospectus.
• Responsibility of other service providers. If there is no recordkeeper or broker to
provide the required information, such responsibility passes to the fiduciary of the
investment contract, product or entity.
• Brokerage window exclusion. They are not subject to the disclosure requirements
for platform providers.
14Question 7 of 10

15. Q. What happens if you fail to provide the
disclosures?
Because a service provider’s failure to comply with the disclosure
obligations results in a prohibited transaction, this could adversely affect
the plan sponsor or similar plan fiduciary. A separate class exemption that
provides relief for the plan fiduciary exists.
There is no relief for a service provider that fails to comply with the
disclosure requirements.
15Question 8 of 10

16. Q. What corrective action can I take for your
disclosure failure?
To qualify for relief, the plan sponsor or similar fiduciary must take
corrective steps with the service provider after discovering the disclosure
problem by requesting in writing the correct disclosure information.
If the service provider fails to comply within 90 days of such request, then
the Department of Labor must be notified no later than 30 days following
the earlier of the service provider’s refusal to furnish the requested
information; or the date which is 90 days after the date the written request
is made.
16Question 9 of 10

17. Q. When should I terminate a service contract?
Evaluate the nature of the particular disclosure failure and determine the
extent of the actions necessary under the facts and circumstances.
Some factors to consider:
• service providers responsiveness in providing the missing information;
• the availability, qualifications, and costs of potential service provider
replacements.
17Question 10 of 10

18. 10 Questions
1. Are you a covered service provider?
2. What services do you provide to the plan?
3. Are you a fiduciary to the plan?
4. What is direct and indirect compensation?
5. How will your compensation be disclosed?
6. What special rules exist for recordkeepers?
7. What special rules exist for platform providers?
8. What happens if you fail to provide the disclosures?
9. What corrective action can I take for your disclosure failure?
10. When should I terminate a service contract?
18

19. ANY QUESTIONS?
This concludes our discussion

20. Eric Roberts
Fiduciary Consultant
eric.roberts@nyhart.com | (317) 845-3511
Qualifications or certifications:
Accredited Retirement Plan Consultant through The
Society of Professional Asset-Managers and
Recordkeepers and Series 63 and 65 designations..

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