Not a Member? Get access to HR news and resources that you can trust.
Change can be scary, but deploying new HR software doesn't have to be.
Is your employee handbook ready for the New Year? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Get the HR education you need without travel expenses or time out of the office.
We don’t just visit a city, we take it over. Join the HR community in NOLA -- June 18-21, 2017.
Updated added by SHRM on 2/2/2012:
DOL Extends Deadlines for Service Provider and Participant-Level Fee Disclosures by 3 Months
On February 2, 2012, the U.S. Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) issued its long-awaited final rule, "Reasonable Contract or Arrangement Under Section 408(b)(2) – Fee Disclosure," requiring covered retirement plan service providers to disclose to plan sponsors the administrative and investment costs associated with their plans. The final rule 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 by 3 Months."
In September 2011, the DOL issued
Technical Release 2011-03, setting out an interim policy regarding the use of electronic media to satisfy disclosure requirements under the fee disclosure rule. In December 2011, the DOL published
Technical Release 2011-03R, which provided additional guidance regarding when and how electronic delivery can be used to fulfill a plan administrator’s disclosure obligations under the fee disclosure rule. This article reviews the options available to plan administrators under the December 2011 technical release.
Present DOL Electronic Disclosure Safe Harbor
First, it is necessary to consider the “safe harbor” electronic disclosure regulation that the DOL issued in 2002.
Documents that would otherwise be provided in hard copy form can be delivered electronically under the safe harbor to the following groups of persons:
For Group 2 participants, the procedures for obtaining and maintaining consent are burdensome. Accordingly, many plan administrators have found it impractical to use the safe harbor for this group.
Acceptable Methods of Electronic Delivery
For plan administrators who choose not to use the safe harbor for electronic delivery of information that must be disclosed under the fee disclosure rule and who wish to avoid paper disclosure, the release offers electronic disclosure alternatives:
Method 1: for information that may be included in a plan benefit statement.
For any required disclosures that may be included in a retirement plan benefit statement under the fee disclosure rule, electronic delivery can be used to the extent and in the same manner as has been permitted for retirement plan benefit statements under the DOL’s
Field Assistance Bulletin 2006-03. This means that, as clarified in the technical release, a secure continuous-access web site can be used. Disclosures that can be made using this method are:
Method 2: for information that may not be included in a plan benefit statement.
This method applies to any information that cannot be disclosed using Method 1, such as required disclosures that may not be included in a plan benefit statement in accordance with the regulation. Disclosures that can be made using this method consist of specific information about designated investment alternatives, including performance data, fees and expenses. Pending further guidance from the DOL, a plan administrator may furnish such disclosures (and, if desired, any disclosures that can be made using Method 1) to a participant through electronic media if all of the following conditions are satisfied:
The plan administrator must provide the participant with an “initial notice” requesting the participant’s e-mail address. Such notice must indicate:
The participant must provide an e-mail address voluntarily. The participant must agree to send the employer, plan sponsor or plan administrator an e-mail address that can be used to transmit the required disclosures. If the employer or plan sponsor supplies a participant with an e-mail address for this purpose, this is not considered “voluntary” unless the participant furnishes that address back to the employer, plan sponsor or planadministrator subsequently and voluntarily. A special transition rule provides a limited exception to the requirement that the submission of an e-mail address is “voluntary” where an e-mail address for a participant is on file with the employer, plan sponsor or plan administrator.
The plan administrator must provide the participant with an annual notice. Suchnotice must describe the participant’s ability to opt out of the electronic delivery process and must be furnished in paper form unless the plan has had electronic interaction with the participant since the initial or most recent annual notice was delivered.
The plan administrator must ensure “actual receipt” of the disclosures. As with the safe harbor, the planadministrator must take appropriate and necessary measures reasonably calculated to ensure that the electronic delivery system results in receipt of transmitted information. This requirement could be satisfied by the return receipt or notice of undelivered e-mail functions to track receipts. Alternatively, the planadministrator might choose to conduct participant surveys or other reviews periodically to ensure receipt.
The plan administrator must protect confidential participant information. In delivering the required disclosures electronically, plan administrators must take appropriate and necessary measures to ensure that personal information contained in any disclosure remains confidential.
Notices must be drafted to be understood by the typical plan participant. The technical release provides little relief to plan administrators who want to satisfy the disclosure requirements of the fee disclosure rule electronically but are stymied by the cumbersome requirements of the safe harbor as to Group 2 participants. However, Method 2 in the technical release is more difficult to implement than the consent procedures in the safe harbor for Group 2 participants.
The technical release allows electronic disclosure using the procedures specified in the earlier field assistance bulletin for some information that must be disclosed under the fee disclosure rule. No rationale is given for this distinction, but in an earlier version of the release the DOL explained that the regulation does not allow information about the performance and fees associated with investment alternatives to be included as part of a retirement plan benefit statement.
However, nothing would appear to preclude the DOL from amending the fee disclosure rule to allow all required disclosures to be included in or with a retirement plan benefit statement. The DOL issued the rule under section 404(a) of the federal Employee Retirement Income Security Act (ERISA), which describes in general how plan fiduciaries must discharge their duties as to the plan. This section of ERISA does not address disclosure, leaving the DOL free to issue regulations on the form of disclosure as it deems appropriate for this purpose.
In the technical release, the DOL indicated its awareness that “some workers and retirees may not be sufficiently computer literate to receive information electronically or have reasonable access to the Internet, and others may simply prefer traditional paper disclosure.” In addition, there is a question about how many of these non-computer-literate persons can be expected to understand and use the massive amount of information that they will receive as a consequence of the participant-level fee disclosure rule, such as that to be found in the model comparative chart.
In the technical release, the DOL has left the door open to some form of interim relief as to electronic disclosure under the fee disclosure rule, as it has indicated that it might not be able to provide final regulatory guidance in this area before the regulation takes effect. However, in light of the
Aug. 30, 2012, compliance date for most plans, planadministrators wanting to use electronic disclosure will have to follow the guidance available under the safe harbor and the technical release.
For many plan administrators, this might mean electronic disclosure to participants with e-mail and Internet access at their desks and paper disclosure for everyone else.
With approximately 900 lawyers and 18 offices worldwide,
McGuireWoods serves public, private, government and nonprofit clients from many industries including automotive, energy resources, health care, technology and transportation. Republished with permission. © 2010 McGuireWoods LLP. All rights reserved.
Editor’s Note: This article should not be construed as legal advice.
SHRM Online Retirement Plans Resource Page
Sign up for SHRM’s free
Compensation & Benefits e-newsletter
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Become a SHRM Member
SHRM’s HR Vendor Directory contains over 3,200 companies