On Thursday, October 14, 2010, the US Department of Labor’s Employee Benefits Security Administration (“EBSA”) announced the issuance of a final rule to ensure that all 401(k) plan participants are provided with certain plan and investment expense information necessary to make informed investment decisions. More specifically, the final rule requires plan administrators to provide each plan participant with very specific plan-related information and investment related information in a chart or similar format that is designed to facilitate a comparison of investment options. The final rule will become applicable to 401(k) plans for plan years beginning on or after November 1, 2011. For calendar-year plans, compliance will be required on January 1, 2012.
The plan-related information that must be disclosed to participants includes general plan information on the mechanics of the plan’s operation, administrative expenses (legal, accounting, and recordkeeping) and individual account expenses that may be charged or deducted from the participant’s individual account based on actions taken by the plan participant, such as requesting a plan loan. Plan-related information must be provided to participants on or before the date that they can first direct their investments and annually thereafter. The investment-related information that must be disclosed includes investment performance information, fee and expense information, an internet web site address that provides additional investment information and a glossary of terms to assist plan participants in understanding the plan’s investment options.
To assist plan sponsors with compliance, the final rule contains a model comparative chart. At this time, all 401(k) plan sponsors should contact their 401(k) vendors to gather information on the type of assistance that vendor intends to provide. With the additional notice requirements, plan sponsors will likely experience an incremental increase in the fees charged by 401(k) providers for plan administration services.