DOL Aligns Deadlines for Retirement Plan Fee Disclosures

By Stephen Miller, CEBS Jul 14, 2011

dated 2/3/2012


DOL Extends Deadlines for Service Provider and
Participant-Level Fee Disclosures

The U.S. Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) published its long-awaited final rule, "Reasonable Contract or Arrangement Under Section 408(b)(2) – Fee Disclosure," in the Federal Register on Feb, 3, 2012. The final rule requires retirement plan service providers to disclose to plan sponsors the administrative and investment costs associated with their plans. It extends the effective date to July 1, 2012, for new and existing contracts or arrangements between service providers and plans covered under the Employee Retirement Income Security Act (ERISA).

Another set of required fee disclosures, from plan sponsors to 401(k) plan participants (participant-level fee disclosures), is set to take effect 60 days after the service provider fee disclosure deadline. Due to the extension of the effective date of the final rule, plan administrators for calendar year plans now must make the initial annual disclosure of "plan-level" and "investment-level" information (including associated fees and expenses) to participants no later than Aug. 30, 2012, and the first quarterly statement (for fees incurred July through September) must be furnished no later than Nov. 14, 2012.

To learn more, see the SHRM Online article "DOL Final Rule Extends Deadlines for Service Provider and Participant-Level Fee Disclosures."

The U.S. Department of Labor (DOL) issued a final rule on July 13, 2011, under the Employee Retirement Income Security Act (ERISA) to extend and align the applicability dates for its retirement plan fee disclosure rules. The final rule extends by three months the applicability date of the DOL's interim final rule on fee disclosures by plan service providers to plan sponsors/fiduciaries (known as ERISA section 408(b)(2) disclosures), and aligns that regulation with its previously issued final rule on quarterly fee disclosures by plan sponsors to plan participants.

The final rule, published in the July 19, 2011, Federal Register, supersedes the DOL's interim final regulation under ERISA section 408(b)(2), published a year earlier in the July 16, 2010, Federal Register, which requires covered service providers of retirement plans to disclose comprehensive information about their fees and potential conflicts of interest to ERISA-covered plan fiduciaries. The regulation was to become effective with respect to plan contracts or arrangements for services in existence on or after July 16, 2011. The final rule moves the effective date to April 1, 2012.

Aligning Disclosures

The change aligns the section 408(b)(2) service provider disclosure deadline with the DOL's final participant-level disclosure rule, issued on Oct. 20, 2010, requiring that employers disclose information about plan and investment costs to workers who direct their investments in ERISA-covered 401(k) and other individual account retirement plans and that these participant fee disclosure reports be made quarterly and conform to the DOL's model comparative charts. This regulation, which applies to plan years beginning after Oct. 31, 2011, contained a 60-day transition rule that permitted initial compliance no later than 60 days after the beginning of the first plan year after Oct. 31, 2011.

The new final rule retains a modified version of the participant-level disclsoure rule's 60-day transition period that works in conjunction with the effective date of the 408(b)(2) service provider disclosure rule.

The transitional period under the final participant-level disclosure rule is amended to require that initial disclosures be furnished no later than 60 days after the first day of the plan year beginning after Oct. 31, 2011, or 60 days after the effective date of the 408(b)(b) service provider disclosure rule. In addition, subsequent quarterly participant fee disclosures must be furnished no later than 45 days after the end of the quarter in which the initial disclosures are required to be furnished to participants and beneficiaries.

This means that for a calendar-year plan, the initial particpiant fee disclosures must be provided by May 31, 2012, and subsequent quarterly disclosures must be provided by Aug. 14, 2012 (the 45th day after the end of the calendar quarter of April 1 through June 30, 2012).

This linkage is intended to ensure that the 408(b)(2) service provider disclsoure rule becomes effective first and that all plans will be able to take advantage of the transition period following the effective date of the 408(b)(2) rule.

A Warranted Delay

“Although complete transparency and fee disclosure are necessary in the world of corporate retirement plans, this delay is warranted and creates uniformity and logistical sense in the final regulations,” commented Anthony Agbay, president of The Agbay Group and an independent retirement plan consultant. “Prior to this reprieve, plan sponsors could have been required to disclose participant-level fees on quarterly statements before the effective date of regulations granting them full knowledge of the fees at the plan level,” he noted.

"Employers and workers will benefit from the increased transparency provided by these fee disclosure rules," said DOL Employee Benefits Security Administration (EBSA) Assistant Secretary Phyllis C. Borzi, in a released statement. "Extending and aligning the applicability dates of these related rules gives plan fiduciaries an appropriate amount of time to get all required fee and investment information from their covered service providers so they can then disclose, by the date required, complete and accurate information about retirement plan and investment costs to their workers."

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related Articles--SHRM:

Sample Glossary of Investment-Related Terms for Disclosures to Retirement Plan Participants, SHRM Online Benefits Discipline, December 2011

What 'Fee Disclosure' Really Means for Plan Sponsors, SHRM Online Benefits Discipline, November 2011

DOL Issues Policy on Electronic Disclosure of Participants' 401(k) Fees, SHRM Online Benefits Discipline, September 2011

Viewpoint: DOL Coordinates Disclosure Deadlines—The Cart Before the Horse No Longer, SHRM Online Benefits Discipline, July 2011

Clarity on Fees Coming Soon, HR Magazine, July 2011

DOL to Confirm Deadlines for Retirement Plan Fee Disclosures, SHRM Online Benefits Discipline, June 2011

Fiduciary Decisions and the Fee Transparency Movement, SHRM Online Benefits Discipline, May 2011

DOL Extends Effective Date for Fee Disclosure Rule, SHRM Online Benefits Discipline, February 2011

What 401(k) Plans Can No Longer Hide, SHRM Online Benefits Discipline, February 2011

FeeDisclosureRulePutsSpotlightonInvestmentCommittees, SHRM Online Benefits Discipline, December 2010

Final Rule on 401(k) Fee Disclosure to Participants Seen as 'Reasoned Approach,' SHRM Online Benefits Discipline, October 2010

Related Resource--External:

DOL Further Extends the Compliance Dates for the 408(b)(2) and Participant Disclosure Regulations, Groom Law Group, July 2011

Resource Guide: Final Regulation on Participant-Level Fee Disclosures, MetLife, July 2011

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Retirement Plans Resource Page

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