February 29, 2012
401(k) Fee Disclosures: It's Time for Employers to Prepare

By Martin Simon, J.D., BLR Senior Legal Editor

The new requirements for the disclosure of 401(k) fees by service providers to plan fiduciaries take effect on July 1, 2012. This impacts when initial 401(k) fee and expense disclosures to plan participants must be made. These participant level requirements apply to plan years beginning after November 1, 2011, but initial disclosures are not due until 60 days after the service provider disclosure regulation’s July 1 effective date.

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Thus, for calendar year plans, the initial annual disclosure of “plan-level” and “investment-level” information (including associated fees and expenses) is due by August 30, 2012 (i.e., 60 days after the service provider disclosure regulation’s July 1 effective date). The first quarterly statement must then be furnished no later than November 14, 2012 (i.e., 45 days after the end of the third quarter (July through September), during which initial disclosures were first required).

The initial disclosures must be provided to all participants and beneficiaries who have the right to direct their investments. The initial quarterly statement need only reflect the fees and expenses actually deducted from the participant or beneficiary’s account during the July through September quarter to which the statement relates.

Now is the time for employers to prepare for the August 30 deadline. Responsible plan fiduciaries and plan administrators should take the following steps now.

  • Determine which plans and which service providers are covered by the requirements.
  • Develop a plan for assessing the completeness of service provider fee disclosures when they are received and setup a communication link with the service provider to correct incomplete disclosures.
  • Clarify with service providers who will formulate and distribute specific participant-level disclosures, including integrating certain service provider disclosures into the participant-level disclosures.
  • Establish a procedure for notifying the Department of Labor if complete information can not be obtained.
  • Establish ongoing processes to review and document the steps taking during the preparation of the fee disclosures to participants.

While these changes are some of the most extensive since ERISA was first enacted, they need not be overwhelming. BLR’s New 401(k) Fee Disclosure Compliance Download Report--is designed to help you with the changes. Inside, you’ll find the information you need in order to meet your fee disclosure responsibilities as a plan sponsor and plan fiduciary. You’ll also receive guidance in communicating new information to plan participants.

Not only will this book help you make the new disclosures required by ERISA, itwill help you apply some communication strategies that may take some of the sting out of the news for employees, many of whom believe their plan is free. While the Department of Labor has issued sample disclosures, many participants will likely find them confusing. That’s why this book focuses on communication, rather than simply disclosure.

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.

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