In 2011 and 2012, we alerted you to new requirements on plan administrators of participant-directed defined contribution retirement plans (e.g., 401(k) plans, 403(b) plans, profit sharing plans and money purchase plans) that are covered by the Employee Retirement Income Security Act ("ERISA") to disclose certain plan and investment-related information, including fee, expense and investment performance information, to participants and beneficiaries. Please click here to read those prior Alerts.
For most plans, the first annual fee disclosure notices were
initially required by August 30, 2012, and many plans distributed
their first annual fee disclosures in August 2012.1 As a
result, we now write to remind you that the second round of annual
notices will be due by the first anniversary of the date that the
first annual notices were distributed, which for most plans will be
in August 2013. As detailed in our prior Alerts,
the annual notice must be distributed to participants and
beneficiaries and must include plan-related information and a
comparative chart of investment-related information. Other
disclosures to participants and beneficiaries continue to be due on
a quarterly basis (these disclosures must include actual
administrative and individual expenses charged to individual
accounts).
Practitioners and employers have appealed to the U.S. Department of Labor ("DOL") to make the annual fee disclosure requirements less of an administrative burden for plan administrators by enabling annual fee disclosures to be provided at some point later in the calendar year (e.g., during open enrollment periods) along with other plan materials or at some other more feasible dates during a year rather than being subject to the stringent requirement to provide annual notices by an arbitrary yearly anniversary date (which date could change from year-to-year depending on the actual distribution date each year).2 However, to date, the DOL has not changed the rules. As such, plan administrators should be preparing to distribute the second round of annual fee disclosure notices by the anniversary date on which the 2012 initial annual notices were distributed.
It is likely that service providers (especially recordkeepers,
investment managers and investment providers) to defined
contribution plans will provide plan administrators with the
necessary information to distribute annual notices to plan
participants and beneficiaries (or, in some cases, the service
providers may provide the annual disclosures directly to plan
participants and beneficiaries), and so plan administrators should
contact their service providers to discuss whether annual fee
disclosure notices have been prepared. Notably, because of the
requirement that disclosures be sent together, if a plan has
multiple investment providers, it will fall on the plan
administrator to compile and distribute relevant investment-related
information in a comparative format to plan participants and
beneficiaries.
1 For non-calendar year plans whose 2012 plan year began after July 1, 2012 but before November 1, 2012, the first annual notices were initially due 60 days following the first day of the 2012 plan year.
2 At least one commentator has asked the DOL to consider that the participant fee disclosure rules be interpreted to enable distribution of the annual fee disclosure notice at any time during a calendar year so long as it is within 18 months from the last annual disclosure. Another request has been for the DOL to provide for a one-time "realignment" of a plan's yearly fee disclosure anniversary by extending the deadline for providing the second round of annual notices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
