EBSA Grants Flexibility for Annual 401(k) Fee Disclosure



A 2-month grace period for yearly reporting to participants, under a direct final rule

By Stephen Miller, CEBS Mar 19, 2015

The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) proposed to amend its participant-level 401(k) fee disclosure regulation by making a technical adjustment that would provide a two-month grace period for the annual disclosures. The proposal was published in the March 19, 2015 issue of the Federal Register. EBSA is soliciting comments on the rule, which are due 30 days from the date of publication.

At the same time, EBSA 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.”

Extra Time for Disclosures

As amended, the regulation provides plan administrators with flexibility as to when they must furnish annual disclosures to participants and beneficiaries.

The rule changes the requirement that annual disclosures be made at least once in any 12-month period to at least once in any 14-month period. The additional two months provided by the rule are in response to comments received by EBSA that plan administrators need more flexibility for these annual disclosures to avoid potentially unnecessary costs and burdens.

The information that is currently required to be disclosed, which helps workers make informed plan and investment decisions about their retirement savings, remains unchanged.

Immediate Enforcement Relief

EBSA also announced a temporary enforcement policy that is effective immediately and generally will apply until the direct final rule takes effect.

According to a new Department of Labor (DOL) fact sheet, “During the interim period until the effective date of the direct final rule, EBSA, 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, provided that the plan administrator reasonably determines that doing so benefits the plan's participants and beneficiaries.”

Response to Industry Concerns

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).

EBSA’s 2012 fee disclosure 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 have meant the next deadline would have been Aug. 30, 2013—earlier than other year-end notices are typically distributed.

But in July 2013, EBSA announced in its Field Assistance Bulletin 2013-02 that, as an enforcement matter, it would 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.

After this relief was announced, 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,” and that “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.”​

Also at that time, the ERISA Industry Committee, Plan Sponsor Council of America and the U.S. Chamber of Commerce wrote to EBSA urging additional flexibility. Their letter stated, “plan administrators want to ensure that the disclosures are made near the annual deadline, but not so close to the deadline that they risk missing it. In addition, it is helpful for employers to have a flexible deadline in case they need to change the dates of their annual enrollment periods or other annual plan-related mailings. A 45-day window would provide them with the flexibility to timely provide the annual disclosures to participants without concern that they may miss the deadline.”

The groups also asked EBSA to “provide flexibility so that plans can change the timing of their annual notice in case of a special event,” such as a switch from a fiscal year to a calendar year, a corporate merger or acquisition, or a change in service provider.

Going Forward

​“The DOL acknowledged that the one-time ‘re-set’ [in Field Assistance Bulletin 2013-02] did not address concerns that the current timing requirement may result in a fixed annual deadline going forward, if the plan administrator wanted to avoid having future year deadlines creep forward to 12-months after an early delivery,” observed a March 2015 alert from Buck Consultants, which further commented:​

Interestingly, DOL’s rationale for this timing change [in the new direct final rule] identified other events that also may warrant a change in the timing of participant fee disclosures—including corporate mergers and changes in recordkeepers, investment lineups, plan years (e.g., from fiscal to calendar year), and law. The direct final rule did not address timing options specific to these changes, but, in many cases, the 14-month rule may provide sufficient flexibility. ...


The revised timing requirement takes the pressure off plan administrators to time delivery of fee disclosures to the same date each year to avoid creeping towards an earlier deadline year-by-year. In light of the strong support it had received in advance of this guidance, it is unlikely that the DOL will need to reverse course.

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

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