As a result of new U.S. Department of Labor requirements, employers sponsoring 401(k) plans will be receiving communications from their "service providers" (mutual funds, investment advisors, claims and third party administrators, COBRA advisers, etc.). The deadline for these disclosures is December 31, 2011, and the materials will disclose  detailed information about the services provided, the fees paid, and thefiduciary status of the provider.

While most of the burden of complying with the regulations seems to fall on the service providers, employers have obligations also: they must assure themselves that the combination of the services provided and the fees charged is "reasonable", i.e. competitive in the market. If a service arrangement is not reasonable, it is a prohibited transaction, the company is potentially liable to the plan for its losses, and the service provider can be liable for excise taxes.

So, how does an employer act reasonably? Putting in place a compliance process anddocumenting the company's attention to it is the best course of action. Here is a good table of contents...

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