On July 23, 2008, the U.S. Department of Labor (“DOL”) published a proposed regulation that would mandate specific disclosure requirements under ERISA for participant-directed individual account plans. These most commonly are 401(k) plans, but also could include plans such as money purchase plans and ESOPs. The principal emphasis of the disclosures would be on plan-related expenses allocated to participant accounts, and the costs and performance of designated plan investment options.
The disclosures would cover plan-related expenses allocated to participant accounts and specific information regarding designated investment options under the plan (not including brokerage windows). The investment-related information would include performance data for each of these investment alternatives and for appropriate broad-based benchmarks, as well as the fees and expenses attendant to the purchase, holding, and sale of the plan’s designated investment alternatives. This information would be provided in the form of a comparative table, for which DOL has provided a model.
Plan-related information concerning administrative procedures and expenses, as well as investment-related information, would be required to be provided to participants and beneficiaries on or prior to the date of eligibility for plan participation, and annually thereafter. Additionally, the actual dollar amounts charged to a participant’s individual account during the preceding quarter for administrative and individual services would be required to be disclosed to participants and beneficiaries at least quarterly.
The requirements are proposed to be effective for plan years beginning on or after Jan. 1, 2009. DOL has, however, invited comment on the feasibility of this effective date.
Comments on all aspects of the proposed regulation are due by Sept. 8, 2008. Plan sponsors and service providers will want to compare the proposal’s requirements with their current practices, and seek to submit comments to DOL by the Sept. 8 deadline if there are areas where they believe the proposal should be modified to better reflect those practices, if appropriate, or to better enable them to comply with the rules (considering, among other things, the short time period before the proposed effective date).