Some changes in the law have a profound impact on the way people think and behave. However, the true and lasting impact of a new legal development can go unrecognized at the time of the event, only to be fully appreciated over time. When new subsection "401(k)" was added to the federal tax code in 1978, few people had any notion that it would dramatically reshape the retirement system in the United States.
We now stand at what may be a further redefining moment in the evolution of the country's retirement policy: the effective dates of fee disclosure regulations under ERISA §§ 404(a) and 408(b)(2). These new regulations will greatly expand the availability of robust fee information to both retirement plan sponsors and plan participants, with the goal of allowing both sponsors and participants to be informed consumers. There is no doubt that the enhanced availability of information in and of itself will alter behavior. Whether it has a positive or negative overall impact on the retirement system remains to be seen.
The new rules are important and complicated. No one involved in the retirement plan industry can afford to stand on the sidelines. Whether you are an investment or other service provider, a plan sponsor, or a plan fiduciary, you must understand the new disclosure requirements and navigate the rules prudently to fulfill your new obligations and avoid liability.
Defined benefit plan investment and service providers, and defined benefit plan sponsors, are not off the hook. While the new participant disclosure rules of ERISA § 404(a) apply only with respect to defined contribution plans, the service-provider disclosure rules of ERISA § 408(b)(2) apply equally to defined benefit plans.
Our answers to frequently asked questions are intended to help investment and service providers, and plan sponsors, understand the new disclosure rules and understand what is required to comply with them. Over the coming months we will add new questions and answers, so come back regularly to see what we have done.