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Plan Ahead for New Disclosures
The Department of Labor (DOL) issued final participant fee disclosure regulations that apply to participant-directed individual account plans, including those that intend to comply with ERISA Section 404(c). Their purpose is to provide uniform disclosure to participants about fees and expenses of a plan’s investment options.
The final rules were effective on December 20, 2010, for plan years beginning on or after November 1, 2011. For calendar year plans, compliance is required on
January 1, 2012.
Disclose Plan-Related Information
Plan administrators must disclose basic plan information, including a list of investment options and when and how participants may give investment instructions. Administrative expenses for plan services that may be deducted from all individual accounts must be described, as well as actual charges that may be deducted from certain participants’ accounts, such as loan origination fees.
Actual charges assessed to individual accounts must be disclosed on at least a quarterly basis, either through a confirmation statement or regular quarterly plan account statements.
Investment-Related Information Must Be Provided
For each investment option, performance data (such as the average annual total return for 1-, 5- and 10-year periods) and a comparison of returns to a benchmark must be disclosed. Fees and expenses information for each option’s operating expenses is also required. Further, a website address where participants can get specific additional investment information must be announced. A glossary of investment terms must also be included.
Initial disclosures are required within 60 days after the date the rules apply to the plan (by February 29, 2012 for calendar year plans), and annually thereafter.
Resources for New Disclosure Rules
DOL’s Fact Sheet: http://tinyurl.com/DOLFeeFinalRule
DOL’s Model Comparative Chart: http://tinyurl.com/DOLFeeModelNotice
Profit Sharing/401(k) Council of America’s detailed summary: http://tinyurl.com/PSCAFeeDisclosure
Kmotion, Inc., P.O. Box 1456, Tualatin, OR 97062; www.kmotion.com
© 2011 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law, or ruling as it applies to a specific plan or situation. Plan sponsors should always consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.