DOL Tweaks Investment Disclosure Deadline for 2013

By Stephen Miller, CEBS Jul 24, 2013

updated 8/28/2013 and 3/19/2015


DOL Grants 2-Month Grace Period for Annual 401(k) Fee Reporting to Participants

On March 19, 2015, the U.S. Department of Labor (DOL) proposed to amend its participant-level fee disclosure regulation by making a technical adjustment to an annual timing requirement. As amended, the regulation provides plan administrators with flexibility as to when they must furnish annual disclosures to participants and beneficiaries by providing a two-month grace period for the annual disclosures.

According toAccording toa DOL fact sheet, “During the interim period until the effective date of the direct final rule, EBSA [the Employee Benefits Security Administration], as an enforcement matter, will treat a plan administrator as satisfying the current "12-month rule" if disclosures are furnished within the new 14-month deadline.”

The current regulatory language states that the term at least annually thereafter “means at least once in any 12-month period, without regard to whether the plan operates on a calendar or fiscal year basis.” The amendment replaces “12-month period” with “14-month period,” so that the term “at least annually thereafter” means at least once in any 14-month period, without regard to whether the plan operates on a calendar year or fiscal year basis.

The DOL also issued the same amendment as a direct final rule, stating, “If we receive no significant adverse comment, the direct final rule will go into effect and we will not take further action on this proposed rule. If, however, we receive significant adverse comment, we will withdraw the direct final rule and it will not take effect.”

(To learn more, see EBSA Grants Flexibility for Annual 401(k) Fee Disclosure, SHRM Online Benefits, March 2015.)

On July 22, 2013, the U.S. Department of Labor (DOL) announced in Field Assistance Bulletin 2013-02 that it was giving sponsors and administrators of participant-directed retirement plans temporary relief from certain annual participant-disclosure requirements through a one-time “reset.”

The participant-level fee-disclosure regulations that took effect in 2012 require plan administrators to “at least annually” provide plan participants and beneficiaries with detailed investment-related information about the plans’ designated investment options using comparative charts (see the SHRM Online article “A Checklist for Participant Fee Disclosures Effective in 2012”).

The regulation defines “at least annually thereafter” to mean at least once in any 12-month period, regardless of whether the plan operates on a calendar or fiscal year. Because the initial disclosure was required by Aug. 30, 2012, “at least annually” would mean the next deadline is Aug. 30, 2013.

Some plan administrators and service providers expressed concerns about this timing requirement. Specifically, they explained that an annual August deadline for the comparative chart has no correlation to the timing of any other annual participant disclosures. Although the regulation allows the comparative chart to be included with other disclosures, the early deadline would have required that it be sent in its own separate mailing rather than at the end of the year during enrollment periods or with individual benefit statements.

Benchmarking Fund Performance

In last year's Field Assistance Bulletin 2012-02R (Question 23), the DOL explained that the comparative chart must show each investment fund's variable rates of return for 1-, 5- and 10-year periods (or for the life of the fund, if shorter) either as of the end of the previous calendar year (as the final rule states) or as of the date of the most recently completed calendar month or quarter. However, to ensure appropriate comparability, the same ending date for a particular period must be used for all investment funds under the plan, and the associated benchmark information must correspond to the same time period.

A One-Time ‘Reset’

In recognition of these concerns, the DOL’s Employee Benefits Security Administration (EBSA), in Field Assistance Bulletin 2013-02, said that, as an enforcement matter, it will consider plan administrators as having satisfied the “at least annually thereafter” requirement if they provide the 2013 comparative chart within 18 months of when they distributed the prior comparative chart and then at least annually (within a 12-month period) thereafter. For example, if plan administrators provided the first comparative chart on Aug. 25, 2012, the DOL will take no enforcement action based on timeliness if they distribute the 2013 comparative chart to participants by Feb. 25, 2014.

Plan administrators that have already distributed their 2013 comparative chart may opt to offer the 2014 chart within 18 months of furnishing the prior chart (in compliance with the regulation). The DOL will take no enforcement action based on timeliness if these plan administrators provide the 2014 comparative chart by Feb. 25, 2015. This will give these administrators the same opportunity for a one-time reset of the timing of their annual comparative chart.

“We appreciate the DOL for recognizing the administrative burden and additional cost that the existing deadline for furnishing the comparative-chart plan would have placed on plan sponsors,” the ERISA Industry Committee, which represents large benefit-plan sponsors, said in a media statement. “As most plans operate on a calendar-year basis, we believe it makes much more sense to permit plan sponsors to distribute these participant fee disclosures with other year-end disclosure requirements.”

Permanent Relief Considered

EBSA said it is considering revising the regulation’s timing requirement to provide reasonable flexibility to plan administrators on a permanent basis. Specifically, the administration is considering whether to allow a 30-day or 45-day window during which a subsequent annual comparative chart would have to be provided, rather than fixing the 12-month (“at least annually”) period to end on a specific day.

Industry Groups Request Clarification

The ERISA Industry Committee (ERIC), along with the Plan Sponsor Council of America (PSCA), and the U.S. Chamber of Commerce urged the Department of Labor (DOL) to clarify its guidance providing relief with respect to the fee disclosure requirements for participant-directed individual account plans (such as 401(k) plans).

The DOL on July 22 released Field Assistance Bulletin 2013-02 allowing 401(k)-type plans to reset the timing for the annual fee disclosures plan sponsors are required to furnish to plan participants. The bulletin states that the DOL, as an enforcement matter, will treat plan administrators as satisfying the “at least annually thereafter” requirement of the participant fee disclosure regulation if they furnish the comparative chart no later than 18 months after the prior comparative chart was furnished.

While the body of the Field Assistance Bulletin 2013-02 references the “comparative chart,” the group believes the bulletin provides a one-time extension for all of the regulation’s annual disclosures and not just the comparative chart. ERIC, PSCA, and the Chamber’s Sept. 18 comment letter asks the DOL to confirm that the guidance applies to all of the requirements under the regulations.

“We believe the Labor Department intended in its original announcement for the relief to apply to all of the annual participant fee disclosures, but it would be very helpful if the Department clarified this. Allowing plans to coincide these required annual disclosures with other year-end disclosure requirements is a common-sense approach that would minimize confusion and costs among plan administrators and participants,” said Kathryn Ricard, ERIC’s senior vice president for retirement policy.

Additionally, the fee disclosure regulation provides a safe harbor that plan administrators can use to satisfy the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) for participants who can direct the investment of their accounts. ERIC, PSCA, and the Chamber also request that the DOL issue guidance to confirm that plan administrators who delay the annual fee disclosures can still rely on the fiduciary safe harbor under the regulation.

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

Related External Article:

Open Letter to DOL: Fix Fee Disclosure Faux Pas Now,, December 2013

Related SHRM Articles:

Survey: Fee Disclosure Had Little Impact, SHRM Online Benefits, July 2013

401(k) Fee Disclosures: A Top 10 List of Issues, SHRM Online Benefits, July 2012

Tips on Communicating 401(k) Fees, SHRM Online Benefits Discipline, April 2012

A Checklist for Participant Fee Disclosures, SHRM Online Benefits Discipline, March 2012

Quick Links:

SHRM Online Benefits page

SHRM OnlineRetirement Plans Resource Page

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