Fee and Investment Disclosure in Participant-Directed Plans: Final Rule

Title:
Fee and Investment Disclosure in Participant-Directed Plans: Final Rule
Publication:
The October 2010 Riker Danzig Employee Benefits ALERT
Attorney:
Practice:

The Department of Labor has announced a final rule (RIN 1210-AB07) requiring disclosure of certain information to participants in a participant-directed retirement plan regarding related fees, expenses and investment options under the plan.

Understanding the final rule is critical so that employers can respond to anticipated questions or complaints from plan participants and in order to justify, from a fiduciary standpoint, the fees, expenses and investments offered under the employer's plan.

(For a related topic please see our recent Employee Benefits Alert on the interim final rule on fees and other information that service providers must disclose to plan fiduciaries.)

Disclosure Requirements

The final rule establishes specific disclosure requirements so that participants in participant-directed plans receive, in an accessible and consistent format, the following information:

Plan-Related Information:

 

This plan-related information must be given to participants on or before the date they are first eligible to make investment decisions under the plan, and each year following. In addition, participants must receive, at least quarterly, a statement showing the dollar amount of any plan-related fees and expenses (whether "administrative" or "individual") actually charged to or deducted from their individual account, along with a description of the services for which the charge or deduction was incurred. These specific disclosures may be included in quarterly benefit statements sent to plan participants.

Investment-Related Information:

 

This investment-related information must be given to participants on or before the date they are first eligible to make investment decisions under the plan, and each year following. This information must be furnished in a chart or similar format designed to facilitate a comparison of each investment option offered under the plan. In this regard, the final rule contains a Model Comparative Chart which may be completed and used by a plan administrator to satisfy this comparative format requirement.

Under the final rule, plan administrators are protected from liability for the completeness and accuracy of information provided to participants if the plan administrator reasonably and in good faith relies upon information provided by a service provider.

Effective Date

Although effective December 20, 2010, the final rule is not applicable until the first plan year beginning on or after November 1, 2011. For calendar-year plans, therefore, the final rule is not applicable until January 1, 2012.

If you have any questions about the final rule, please contact Jim Karas or Amanda Albert of Riker Danzig's Employee Benefits and Executive Compensation Group.