Regulations under ERISA Section 404(a) require plan administrators to disclose to plan participants and beneficiaries certain fee and investment performance information about each designated investment alternative made available under a participant-directed defined contribution plan. For calendar year plans, this information, which includes a comparative chart of all investment alternatives, was initially required to be provided to participants and beneficiaries no later than August 30, 2012. In addition, the regulations require that such information also be provided “annually” ( defined to mean at least once in any 12-month period, regardless of whether the plan operates on a calendar year or fiscal year basis).
Re-set Option Offered by Department of Labor
Many plans send required notifications closer to the end of the plan year. Acknowledging this practice and concerns raised over the cost of a separate distribution covering just this investment information, the Employee Benefits Security Administration (“EBSA”) issued Field Assistance Bulletin No. 2013-02, which grants a one-time “reset” option for the 12-month period.
This “reset” option permits an employer to provide the “2013 comparative chart” after the original 12-month period required by the 404(a) regulations. However, the chart may not be delayed later than 18 months after the initial comparative chart was provided.
Example 1 from EBSA Guidance:
If a plan administrator furnished the first comparative chart on August 25, 2012, the “2013 comparative chart” would be due no later than August 25, 2013. In accordance with this Bulletin, however, the Department will take no enforcement action based on timeliness if the plan administrator furnishes the “2013 comparative chart” by February 25, 2014.
What if you have already distributed the “2013 comparative chart” or incurred costs to compile it so that the 2013 reset option is not helpful? EBSA will allow you to use your reset option in 2014.
Example 2 from EBSA Guidance:
If a plan administrator furnished the first comparative chart on August 25, 2012, and intends to furnish the second administrative chart on August 25, 2013, the “2014 comparative chart” would be due under the terms of the final regulation no later than August 25, 2014. In accordance with this Bulletin, however, the Department will take no enforcement action based on timeliness if the plan administrator furnishes the “2014 comparative chart” by February 25, 2015.
Reset Option Limited to Certain Disclosures
The reset option is limited to information required to be disclosed under specific provisions of the regulation, which includes the following:
- How to give investment allocation instructions
- Any restrictions on investment elections
- Voting, tender and similar rights that apply to the investment alternatives
- Identification of the designated investment alternatives
- Identification of any designated investment managers
- Description of brokerage windows available under the plan
- Comparative chart which lists, for each designated investment alternative, the following: fund name, type of investment option, 1-year, 5-year and 10-year performance on a calendar year basis, fixed rate of return for fixed rate investment options, benchmark data, shareholder fees, transfer/purchase restrictions, expense ratio, total expenses as a dollar amount
- Certain standard statements regarding investment risks
- Plan administrator name, address, phone number and website
- Internet address where additional information regarding the investments may be found, including a glossary of investment terms and a description of any annuity options
Is the Reset Option Helpful to You?
Where are you in your steps towards issuing the “2013 comparative chart”? If you haven’t yet incurred costs to comply or taken serious steps towards compliance, using the reset option this year to reset the annual compliance date may be best. If you are already pretty far along the compliance path or have actually already distributed the “2013 comparative chart,” you can keep the reset option in your back pocket in case it’s helpful next year.