On October 15, 2010, the Department of Labor published in the Federal Register a final regulation requiring plan administrators of participant-directed individual account plans (e.g. 401(k) plans) to disclose to plan participants and beneficiaries certain plan and investment-related information, including fee and expense information. Although the final regulation imposes the obligation to furnish the information on plan administrators, much of the information will have to be provided by service providers to the plan, e.g. mutual funds, insurance companies, recordkeepers, etc.
In particular, plan administrators must disclose information related to the plan, such as information about the current investment options under the plan and how to give investment instructions, administrative expense information and individual expense information, such as fees and expenses that may be charged to or deducted from a participant's account (e.g. plan loan fees). Under the final regulation, this information must be provided to participants on or before the date they can first direct investments under the plan and then annually thereafter. In addition, participants must receive statements, at least quarterly, showing the dollar amount of the plan-related fees and expenses along with a description of the services for which the charge or deduction from their accounts was made.
Investment-related expenses that must be disclosed include performance data for the investment options under the plan, benchmark information, fee and expense information, including the total annual operating expenses for options that do not have a fixed rate of return, an internet Web site and a glossary of terms to assist participants and beneficiaries in understanding the options available to them under the plan. Like plan-related information, investmentrelated information must also be furnished to participants or beneficiaries on or before the date they can first direct investments under the plan and then annually thereafter. It must also be furnished in a format designed to facilitate a comparison of each investment option available under the plan. The final regulation contains a model comparative chart which plan administrators may use to satisfy this requirement.
The final rule will become effective beginning on December 14, 2010. However, the final rule will become applicable for plan years beginning on or after November 1, 2011. For calendar year plans, compliance will be required on January 1, 2012.