By Martin Simon, J.D., BLR Senior Legal Editor
The Department of Labor (DOL) has issued Field Assistance Bulletin No. 2012-02 to supplement the regulations on fee disclosures to 401(k) plan participants. The bulletin is in the form of 38 questions and answers and also provides guidance on the related requirement on service providers to furnish specified information to plan administrators so that administrators may comply with their disclosure obligations to 401(k) plan participants.
Effective Dates For 401(k) Fee Disclosures
The bulletin specifies that plan administrators must furnish the first initial disclosures to participants and beneficiaries no later than 60 days after July 1, 2012, or, if later, 60 days after the first day of the first plan year that begins after November 1, 2011. Accordingly, for most plans, including calendar year plans, the first initial disclosures must be furnished to participants and beneficiaries no later than August 30, 2012. However, for plans with plan years beginning after July 1 but on or before October 1, the initial disclosure is due 60 days later. Thus the latest disclosures are due by November 30 for plans whose plan year begins on October 1.
Transitional DOL Enforcement Relief
The bulletin notes that many plans and service providers have made their initial disclosures before the bulletin was issued and in advance of the July 1 and August 30 deadlines. In light of the significance of these required disclosures and the already extended delay in the implementation of the regulations, the DOL has decided that further broad-based extensions are not appropriate. For enforcement purposes, however, the DOL says it will take into account whether covered service providers and plan administrators have acted in good faith based on a reasonable interpretation of the new regulations. If they have acted in good faith, enforcement actions generally would be unnecessary if the covered service provider or plan administrator also establishes a plan for complying with the new requirements of Bulletin 2012-02 in future disclosures.
Obligations for Providing Web Address
The bulletin provides that plan administrators have multiple ways to satisfy their obligation to provide a website address. For example, a plan administrator may contract with a third party administrator or recordkeeper to establish and maintain the website for the plan. Alternatively, a plan administrator may use the existing website address of the employer who sponsors the plan to make available the required supplemental investment information. The plan administrator also may use website addresses provided by the issuers of the designated investment alternative(s) (e.g., the family of mutual funds comprising the plan’s investment platform) as long as this address is sufficiently specific to lead the participant to the required information.
Although the plan administrator is responsible for ensuring the availability of a website address, DOL says that a plan administrator will not be responsible for the completeness and accuracy of information used to satisfy the regulation’s disclosure requirements, including the website address requirement, when the plan administrator reasonably and in good faith relies on information received from or provided by a plan service provider or the issuer of a designated investment alternative.
Reporting Administrative Expenses Not Paid by Participants
Many plans provide for the payment of administrative expenses either from amounts forfeited under the terms of the plan or from the general assets of the employer sponsoring the plan and do not allow payment of administrative expenses from the individual accounts of plan participants or beneficiaries. In such a case, the administrative expenses do not have to be disclosed.
Even if administrative expenses could be charged against individual accounts if the employer fails to pay them, the fact that the plan administrator has never charged the individual accounts of participants and beneficiaries and does not intend to do so in the foreseeable future—and the plan has a written commitment from the employer that it will pay administrative expenses not covered by forfeitures—relieves the plan of having to disclose the explanation of these expenses.
The plan administrator would be required to inform participants and beneficiaries if circumstances were to change so that the plan administrator might prospectively charge the administrative expenses against the individual accounts of participants and beneficiaries.
The Bulletin provides guidance on numerous specific issues and should be reviewed by plan administrators before preparing their initial disclosure. The full text of Field Assistance Bulletin No. 2012-02 is available at www.dol.gov/ebsa/pdf/fab2012-2.pdf.
BLR offers a new resource—2012 New Fee Disclosure Rules: What You Need to Communicate About 403(b) and 401(k) Plan Fee—which provides everything you need to know about the new 401k Fee Disclosure Rules.This downloadable resource includes background information about the new fee disclosure rules and about your role as plan fiduciary; specifics about the information that will be reported to the plan fiduciary; suggested procedures that can demonstrate that you are properly undertaking your fiduciary responsibilities. information about what and how to disclose required information to plan participants and much more.
New Video: For more information on this topic, BLR has posted a video explaining the 401(k) fee disclosure requirements in greater detail.
Martin Simon, J.D. is a Senior Legal Editor for BLR’s human resources and employment law publications. Mr. Simon has worked in legal publishing for over 20 years. He worked for 7 years as a legal editor for Prentice Hall, where he wrote and edited for the Pension and Profit Sharing and the Plan Administrators Compliance Manual looseleaf services. He has been a legal editor for BLR for more than 17 years. Mr. Simon has been on the Board of the Hartford Chapter of Working in Employee Benefits for 4 years. Mr. Simon has a B.A. degree with Honors from the University of Connecticut, where he was a member of the Honors Program and Phi Beta Kappa. He received his law degree from the University of Connecticut and is a member of the Connecticut Bar.