Mary Samsa and Allison Wilkerson discussed that the majority of ERISA disclosures are in fact employee communications – many of which are viewed as “routine” by employers. As such, plan sponsors are continually balancing the best way in which to relay complex benefit plan information in a manner to best be understood by employees but equally satisfy the applicable regimented disclosure requirements. Some key takeaways from their presentation included not only the compliance and content requirements, but methods for delivering communications to employees, traps for the unwary (i.e., inconsistent information communicated, the advantage of having these communications reviewed by legal counsel, and oversight of third parties who assist in preparing communications) and some common sense approaches for routine reviews of communications and continuing education to participants so that periodic communications are not always monumental tasks.
The United States Department of Labor (DOL) recently issued guidance that gives administrators of defined contribution plans a one-time opportunity to reset their deadline for providing participants with the plan’s required annual fee disclosure.
Background
Under DOL final regulations issued in 2010, administrators of 401(k) plans and other defined contribution plans with participant-directed investments must provide participants and beneficiaries with an annual fee disclosure that includes detailed plan and investment-related information (see “Department of Labor Issues New Rules on 401(k) Fee Disclosure to Participants” for more information). For most plans, including calendar year plans, the initial fee disclosure was due by August 30, 2012, with subsequent disclosures to be provided at least once in any 12-month period.
Plan administrators and other interested parties expressed concern that because the annual August 30 deadline does not coincide with the timing for other participant disclosures, it is not feasible to combine the distribution of the annual fee disclosure with other participant materials, thus requiring a separate mailing and associated costs. Also, some believed that the disclosure would be more effective when distributed with other plan communications or at a more relevant time, such as during enrollment periods.
New Guidance
In response to these concerns, the DOL issued Field Assistance Bulletin (FAB) 2013-02, which provides plan administrators with a one-time opportunity to reset the deadline for the annual fee disclosure if the plan administrator determines that doing so will benefit plan participants and beneficiaries. Under this guidance, a plan administrator will be treated as satisfying the annual notice requirement by furnishing the 2013 disclosure no later than 18 months following the date of the initial disclosure, after which the 12-month period would apply. For example, if the initial disclosure was furnished on August 25, 2012, the 2013 disclosure would be due no later than February 25, 2014. If a plan administrator chose to furnish the 2013 disclosure on December 20, 2013, then the 2014 disclosure would be due no later than December 20, 2014.
In addition, for those plan administrators who have already taken steps and incurred costs to furnish the 2013 disclosure, the one-time reset opportunity may instead be applied to the 2014 disclosure. For example, if a plan administrator has already worked on the 2013 disclosure and it is furnished on August 25, 2013, the 2014 disclosure would be due no later than February 25, 2015, and then the 12-month period would apply beginning with the 2015 disclosure.
FAB 2013-02 is welcome guidance for plan administrators who wish to distribute the annual fee disclosure with other participant materials or at a different time of the year. Although this guidance does not address concerns that plan administrators must satisfy a fixed annual deadline for the disclosure, the DOL indicated that it is considering further revising the timing requirement to permit a disclosure window (for example, distribution within a 30-45 day period) in future years.
For most defined contribution plans, initial annual fee disclosures are due to participants by August 30, 2012. In order to facilitate compliance with the new fee disclosure rules, the U.S. Department of Labor recently issued Field Assistance Bulletin 2012-02, which provides helpful commentary on 38 common disclosure questions, including disclosure of administrative expenses and brokerage window fees.
The U.S. Department of Labor (DOL) recently issued final regulations relating to service provider fee disclosures to plan fiduciaries under Section 408(b)(2) of the Employee Retirement Income Security Act of 1974, as amended (ERISA) which affect the participant fee disclosure regulations under Section 404(a) of ERISA finalized by the DOL in October 2010. Under the new final regulations, service providers must provide initial fee disclosures to plan fiduciaries by July 1, 2012, and plans must provide initial fee disclosures to participants by August 30, 2012. In addition, the DOL recently issued guidance regarding electronic delivery of disclosures to participants under Technical Release 2011-03R.
McDermott Will & Emery recently offered a complimentary webcast that focused on what employers should expect to receive from service providers and the practical steps they should take to fulfill their fiduciary responsibilities to provide participant fee disclosures in light of the new final regulations and the guidance regarding electronic delivery.
If you missed the webcast, please click here to listen to the discussion and/or view the slides.
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