The Department of Labor has finalized its regulation that will expand the requirements for disclosures to participants in 401(k) plans and other individual account plans where the participant directs the investment of the account. The principal aim of the new rules is to establish a uniform, basic disclosure routine that will provide participants with information about how fees and expenses are charged to a plan and to their individual accounts. This new regulation is a corollary to a separate set of regulations issued in July 2010 that impose obligations on record-keepers, investment providers, and other plan service providers to disclose to the plan sponsor the elements and amounts of fees charged to a plan and its participants under the service arrangements the provider has with the plan and its investment funds. In most 401(k) plans, participants have the ability to direct the investment of their accounts, and in most of these plans a significant portion of the costs in providing record-keeping, investment choices, access to information through the internet, voice-response, or other support systems is paid for through asset-based fees or other charges to participant accounts. These fees might be “12b-1” fees, sub-advisory fees and other charges that are imposed by mutual funds or under group investment contracts used by insurance companies and other providers to bring investment options and plan record-keeping services to plans. The aim of the regulations is to increase the awareness of both plan sponsors and plan participants in how services are paid for. The regulations requiring the disclosures to plan sponsors are effective in July 2011. The newly issued regulations that impose new disclosure rules for information to be given to participants are effective for plan years beginning on or after November 1, 2011. This will be the 2012 plan year for calendar year plans. The new disclosure rules apply regardless of whether a plan intends to use the fiduciary protection afforded by ERISA Section 404(c) which allows a plan fiduciary to avoid responsibility for the investment results produced by a participant’s investment directions. To obtain the ERISA Section 404(c), protection, a plan fiduciary must provide sufficient investment choices and information to participants. The 404(c) rules are optional; the new fee disclosure regulations are mandatory. For the most part, it is anticipated that service providers will develop the means to meet the new disclosure requirements. Furthermore, a plan administrator will not be liable for the completeness and accuracy of the information given to participants under the rules when the plan administrator “reasonably and in good faith” relies on information received from and provided to participants by a service provider or issuer of investment choices. Look for reports and information from your 401(k) service providers over the coming months on these new disclosure requirements. Reasonable and good faith reliance will require a plan administrator to understand a plan’s fee structure, how plan costs are being paid for as well as a judgment that the fees are reasonable. (Department of Labor Regulations Section 2550.404a-5 and 2550.404a-1, issued October 7, 2010.)