Department of Labor unveils 401(k) fee rules

NEW YORK (Reuters) - Advisers and brokers who manage 401(k) plans will have to provide detailed information about the fees they charge under new rules unveiled by the U.S. Department of Labor on Thursday, but the changes are not as onerous as the brokerage industry first feared.

The rules require advisers to provide a detailed account of the fees they are charging to manage the retirement plans, which are mainly employer-sponsored.

Phyllis Borzi, assistant secretary for the Labor Department's Employee Benefits Security Administration, said the rules are scheduled to be published in the Federal Register tomorrow and go into effect in July 2011.

Advisers will also have to reveal how they and their firm will be paid. Are they paid, for example, by billing the plan's sponsor directly or through revenue-sharing agreements, where some of the expenses charged for a mutual fund included in the plan are used to pay the adviser and firm?

"For broker-dealers, this is really as good as it could have been," said Jason Roberts, an attorney with Reish & Reicher who specializes in pension plans.

Under the initial proposed rules, advisers and brokers were also going to have to give employers a written contract detailing their services. This requirement has been removed.

Instead, they will have to provide written disclosures about their services and fees, which is a far less burdensome task, said Roberts.

"A contract really solidifies that I'm going to provide these services and you are going to hold me to them," said Roberts. "You can say things much more generally in a disclosure format."

Jeffrey Turner, of the Division of Regulations at the Labor Department, told reporters on a media call on Thursday afternoon that having a contract was "not the most significant part of the process."

The main thing was to have the disclosures about fees in writing, he said.

The American Society of Pension Professionals and Actuaries applauded the new rules.

"Providers now have clear guidance on what disclosures are required and plan sponsors will have the information they need to make informed choices about their retirement plans," said Brian Graff, chief executive of ASPPA, in a statement.

The proposed rules, which were first released in December 2007, also required advisers and brokers to provide a narrative description of any potential conflicts of interest they may face and how they would be overcome, for example, if the broker's firm also owned a mutual fund company that would benefit if the 401(k) plan bought those funds.

This narrative description is also no longer required. Instead, advisers and brokers will have to detail any additional compensation they receive, such as a commission for selling a particular investment.

(Reporting by Helen Kearney; Editing by Steve Orlofsky)