Standards
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Executive Summary
Federal pension law establishes a rule in ERISA section 408(b)(2) that sponsors of retirement plans must test the reasonableness of the compensation charged by vendors against their plans' assets. In order to confirm a plan sponsor's compliance with that rule, an IFLC task force developed a standard by which audits of such vendors' fees may produce an opinion of compliance.
ERISA Vendor Compensation Standard
IFLC has issued Fiduciary Audit Standard No. 13 ("IFAS-13"). An IFAS-13 audit will evaluate vendors' charges against industry norms and test a vendor's performance. Vendors embraced within the IFAS-13 protocol include investment advisors, providers of investment products, recordkeepers, third party administrators, custodians, and directed trustees. The audit concludes with an opinion of compliance.
IFAS-13 was developed primarily in response to the U.S. Department of Labor's ruling that a wide information gap exists between retirement plan sponsors and the vendors of investment advice, financial products, recordkeeping, and custodial services.
In its ruling, the Department of Labor suggests that plan sponsors are currently ill-equipped to satisfy the demands of the 408(b)(2) Fee Disclosure rule, which is effective July 1, 2012. IFAS-13 audits will help chief financial officers and investment committee members ensure that they comply with the law.
Read the summary here.
Contact IFLC here for details on how to obtain either a readiness assessment or a compliance audit of the fees your plan pays to its service provders.
Join an IFLC standards technical committee and make your mark for a better future for America's workers. Inquire here.
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