Does this apply to those whose clients are employers that pay certain plan fees themselves? Good question. During an Investment Management Consultants Association (IMCA) conference where Carmody spoke last fall, "One person asked whether, in the case where the bundled provider and the investment advisor billed the plan sponsor and the plan [and its participants] was not charged, does he need to offer disclosure?"

The answer is a resounding "yes," Carmody believes, particularly since the assignment of plan fees is frequently a moving target. "In some years, the bill is paid by the employer and other years it is charged to the plan," says Carmody.

"This is an area not fully defined by regulation, but I responded in the affirmative," he says, adding that whether the plan pays or the plan sponsor pays, disclosing all fees is a good thing for three reasons. "First, it provides a strong defense in litigation. Secondly, [advisors'] clients will appreciate it, and thirdly and most importantly, it's the right thing to do.

"We've been saying all along that instead of shunning or avoiding fiduciary responsibility, advisors and service providers should embrace it. This is the culture change that will restore trust in the retirement plan service process."

Plan Sponsor Responsibilities Increase, Too
It's important to keep in mind that the reasonable-contract fee disclosure regulation appears as part of a multifaceted Labor Department effort. This includes the department's so-called rule, "Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans," requiring plan fiduciaries to disclose the dollar amount that each participant pays for administrative services such as accounting and record keeping every quarter.

The Labor Department estimates that those disclosures would save participants $6.1 billion over ten years, including $2.3 billion from lower fees as investment houses become more cost-aware and more competitive. Reish believes that those particular regulations won't take hold until 2010. Members of the private sector have argued strongly that it will take another year at least to get up to speed with all the new rules, he says, and "people can only do so much."

Some 403(b)s Are Impacted
He points out that 403(b)(2) rules technically might apply to defined benefit plans, health and welfare plans, and even individual retirement plans.

Nevertheless, he observes, they were written as though "specifically for 401(k) plans," and 401(k) plan providers will almost certainly have to comply with the 403(b)(2) changes in short order, says Reish.

He notes that providers dealing with 403(b) plans sponsored by tax-exempt organizations and receiving employer contributions (tax-exempt hospitals, for instance) will be subject to the same disclosure rules as 401(k)s, and the same schedule for implementing changes.

On the other hand, 403(b)(2) is a proposal under ERISA, and 403(b) plans not governed by ERISA will not be subject to the disclosure rules.
IRS Rules For 403(b) Plans