SECRETARY OF LABOR ANNOUNCES THE ICI/ABA/ACLI UNIFORM 401(K) PLAN FEE DISCLOSURE FORM

[11120] July 15, 1999 TO: PENSION MEMBERS No. 26-99 PENSION OPERATIONS ADVISORY COMMITTEE No. 35-99 AD HOC COMMITTEE ON UNIFORM 401(K) PLAN FEE DISCLOSURE FORM RE: SECRETARY OF LABOR ANNOUNCES THE ICI/ABA/ACLI UNIFORM 401(K) PLAN FEE DISCLOSURE FORM ______________________________________________________________________________ Today, Secretary of Labor Alexis M. Herman held a press conference announcing the uniform 401(k) plan disclosure form developed by the Investment Company Institute (“ICI), the American Council of Life Insurance (“ACLI”) and the American Bankers Association (“ABA”). Secretary Herman thanked the ICI, ABA and ACLI for our expertise, dedication and teamwork in developing a 401(k) fee disclosure form to help small employers make “apples to apples” comparisons of 401(k) products. The Secretary noted that this private sector initiative helps us move from “rhetoric to results.” Although employers are not required to use the disclosure form, the Secretary emphasized that it should be a useful tool in helping them make meaningful comparisons among different investment vehicles and plan services. In addition to announcing the ICI/ ABA/ACLI disclosure form, the Secretary unveiled a brochure developed by the Department to help employers “ask the right questions to better understand and evaluate the fees and expenses” related to their plans. Representatives from the industry associations joined the Secretary in today’s press briefing including Craig Tyle, General Counsel of the ICI, Ann Combs from the ACLI and Ed Yingling from the ABA. Background As you may be aware, this joint project was initiated in December, 1998, when the Department of Labor approached the ICI, ABA and ACLI and requested that we work together to develop a uniform disclosure form that would help employers, particularly small employers, compare the costs associated with products and services offered by competing 401(k) plan service providers. Based on meetings with members, the ICI agreed that developing a uniform disclosure form would be an important step in providing employers that sponsor 401(k) plans with full and complete disclosure of the costs associated with their plans’ investments and services. The ICI, ABA and ACLI each worked with their member organizations and developed three versions of a disclosure form. It was subsequently decided to utilize the ICI’s draft disclosure form as the working draft. This final disclosure form represents the comments and input of all three associations’ members over a period of 6 months involving numerous meetings, conference calls and 2requests for comments. We especially want to thank those members who reviewed the various drafts of the disclosure form and provided us with comments and suggestions. Uniform 401(k) Fee Disclosure Form The goal of the ICI, ABA and ACLI was to create a uniform form that 401(k) plan sponsors will find flexible, easy-to-use and easy-to-understand. The form contains 11 pages, including the section containing definition of terms. However, because of its flexibility, the form can be shortened to just two pages depending on the level and amount of detail of 401(k) expenses requested by the plan sponsor. Although the form is applicable to employers of any size, we anticipate that it will be used mostly by small employers. We anticipate that the form will be used in the following manner: employers who are interested in establishing a plan or changing service providers could request that competing service providers fill out the form detailing the cost and types of services and investment products offered. The disclosure form includes the following sections: Overview, Total Plan Expenses, Schedule A (Investment Product Fees/Estimates), Schedule B (Plan Administration Expenses), Schedule C (One Time Start-Up/Conversion Expenses), Schedule D (Service Provider Termination Expenses) and Schedule E (Definition of Terms). The Overview section provides an overview of the purpose of the disclosure form and a general description of how 401(k) plan expenses are calculated. The Total Plan Expenses section represents total 401(k) plan expenses and includes the following four parts: (I) investment product fees, which lists total expenses for each type of investment product; (II) plan administration expenses, which lists the total plan administration expenses for the plan; (III) plan start- up or conversion related charges, which lists total expenses for start-up plans or conversion plan services; and (IV) service provider termination related charges, which provides the total plan expenses related to service provider termination. Schedules A through D contain detailed information for each of the four parts of the Total Plan Expenses section. For example, Schedule A contains detailed fee calculations for each type of investment product included in the plan, which when added up, correspond to the total investment product fees listed in part I of the Total Plan Expenses section. Schedule B contains detailed information regarding the types of plan administration services provided by the service provider and the cost of each service, which when added up, correspond to the total plan administration expenses listed in part II of the Total Plan Expenses section. Schedule C and D contain information on one-time start- up/conversion and termination expenses respectively. Schedule E contains a glossary of terms used throughout the disclosure form. Next Steps The ICI, ABA and ACLI intend to provide various employer trade associations with a copy of the form. In addition, we intend to meet individually with the groups to review the form in detail and answer any questions they may have with it. We encourage our members to consider using the disclosure form. You may download the form from the ICI’s public website at www.ici.org/retirement/401k_fees.html. In addition, ICI members may down-load the form from our members-only website at members.ici.org. Note that the members-only website is password protected. If you do not already have a password, you may a fill out an enrollment form posted on the ICI’s home page or contact Lee Butler at the ICI at (202) 326-5931. Copies of the uniform 401(k) plan fee disclosure form, the Department of Labor’s press release, the Department’s employer brochure, the joint ICI, ABA and ACLI press release and Craig Tyle’s 3remarks from today’s press briefing are attached. If you have any questions or comments concerning the disclosure form, please call myself at (202) 218-3563 or Russ Galer at (202) 326-5835. Kathryn A. Ricard Assistant Counsel Attachments