In 2011 and 2012, we alerted you to new requirements on plan administrators of participant-directed defined contribution retirement plans (e.g., 401(k) plans, 403(b) plans, profit sharing plans and money purchase plans) that are covered by the Employee Retirement Income Security Act ("ERISA") to disclose certain plan and investment-related information, including fee, expense and investment performance information, to participants and beneficiaries. Please click here to read those prior Alerts.
For most plans, the first annual fee disclosure notices were initially required by August 30, 2012, and many plans distributed their first annual fee disclosures in August 2012.1 As a result, we now write to remind you that the second round of annual notices will be due by the first anniversary of the date that the first annual notices were distributed, which for most plans will be in August 2013. As detailed in our prior Alerts, the annual notice must be distributed to participants and beneficiaries and must include plan-related information and a comparative chart of investment-related information. Other disclosures to participants and beneficiaries continue to be due on a quarterly basis (these disclosures must include actual administrative and individual expenses charged to individual accounts).
Practitioners and employers have appealed to the U.S. Department of Labor ("DOL") to make the annual fee disclosure requirements less of an administrative burden for plan administrators by enabling annual fee disclosures to be provided at some point later in the calendar year (e.g., during open enrollment periods) along with other plan materials or at some other more feasible dates during a year rather than being subject to the stringent requirement to provide annual notices by an arbitrary yearly anniversary date (which date could change from year-to-year depending on the actual distribution date each year).2 However, to date, the DOL has not changed the rules. As such, plan administrators should be preparing to distribute the second round of annual fee disclosure notices by the anniversary date on which the 2012 initial annual notices were distributed.
It is likely that service providers (especially recordkeepers, investment managers and investment providers) to defined contribution plans will provide plan administrators with the necessary information to distribute annual notices to plan participants and beneficiaries (or, in some cases, the service providers may provide the annual disclosures directly to plan participants and beneficiaries), and so plan administrators should contact their service providers to discuss whether annual fee disclosure notices have been prepared. Notably, because of the requirement that disclosures be sent together, if a plan has multiple investment providers, it will fall on the plan administrator to compile and distribute relevant investment-related information in a comparative format to plan participants and beneficiaries.