Retirement Plans Get One Chance to Change Annual Participant Fee Disclosure Deadline

On July 22, 2013, the Department of Labor (DOL) announced a one-time opportunity for administrators of participant-directed individual account plans such as 401(k) and ERISA-covered 403(b) plans to “re-set” their annual deadline for distributing plan-related information and the investment comparative chart required by the participant fee disclosure rules (the “Fee Disclosures”). Plan administrators now have an opportunity, in either 2013 or 2014, to reset the annual deadline to a date that is within 18 months from the date of the last Fee Disclosures to plan participants and beneficiaries.

In October 2010, the DOL issued a final regulation on plan- and investment-related disclosure requirements (including information on fees and expenses for investment alternatives under the plan) for participant-directed individual account plans, such as 401(k) and ERISA-covered 403(b) plans.1 As part of these disclosure requirements, covered plans are required to furnish participants with information about certain plan administration expenses and a comparative chart of the investment alternatives under the plan (the “Fee Disclosures”). For calendar-year plans the initial Fee Disclosures had to be furnished to participants and beneficiaries no later than August 30, 2012, and then at least once in each subsequent 12-month period. For example, a plan administrator that furnished the initial Fee Disclosures on August 25, 2012, is required to furnish the second annual Fee Disclosures no later than August 25, 2013.

The DOL, in Field Assistance Bulletin 2013-02, has provided plan administrators with a one-time opportunity to “re-set” this annual deadline for furnishing the Fee Disclosures without facing enforcement action for failure to provide the disclosures at least annually.2 This relief addresses recent concerns of plan administrators and service providers that a mid-year deadline to furnish the Fee Disclosures does not correspond with other annual participant disclosures and plan participants may be more likely to focus on these disclosures if they are distributed during annual enrollment periods or with individual benefit statements.

Rules to “Re-Set” Annual Fee Disclosure Deadline

Plan administrators that wish to “re-set” the deadline for distributing the Fee Disclosures this year must comply with the rules described below and otherwise reasonably determine that making this change will benefit participants and beneficiaries:

  • Plan administrators may furnish the second annual Fee Disclosures no later than 18 months after the initial Fee Disclosures were furnished in order to “re-set” the annual disclosure deadline. For example, if the initial Fee Disclosures were furnished on August 25, 2012, the plan administrator now may furnish the second annual Fee Disclosures by February 25, 2014.
  • The subsequent annual disclosure must then occur within 12 months after the date the second annual Fee Disclosures are furnished. For example, if a plan administrator distributes the second annual Fee Disclosures on December 1, 2013, thereby “re-setting” the annual deadline from August 25th to December 1st, the next annual Fee Disclosure is due by December 1, 2014.

If a plan administrator has already furnished the 2013 Fee Disclosures or taken steps to furnish these disclosures by the existing 2013 deadline for the plan, the DOL has provided that the plan administrator may “re-set” the deadline in the following year. In that case:

  • The plan administrator may furnish the third annual Fee Disclosures (the Fee Disclosures otherwise due in 2014) no later than 18 months after furnishing the 2013 Fee Disclosures. For example, if the plan administrator furnishes the 2013 Fee Disclosures on August 25, 2013 (the plan’s 2013 deadline based on 12 months from its initial Fee Disclosures), the plan administrator may take the one-time opportunity to “re-set” the disclosure deadline by furnishing the next annual Fee Disclosures no later than February 25, 2015.
  • All subsequent annual disclosures must then occur within 12 months after the date the prior Fee Disclosures are furnished. Under the example above, if the plan administrator distributes the 2014 Fee Disclosures on December 1, 2014, thereby “re-setting” the annual deadline from August 25th to December 1st, the next annual Fee Disclosure is due by December 1, 2015.

Request for Comment

The DOL also indicated that it is considering whether to permanently allow for a 30-day or 45-day window during which subsequent annual Fee Disclosures would have to be furnished, rather than fixing the “at least annually” requirement to the day the last Fee Disclosures were furnished. The DOL has requested comments on this issue.

Next Steps

In light of the fast-approaching August deadline for calendar-year plans to furnish the 2013 Fee Disclosures, plan administrators should:

  • Determine whether changing the deadline for furnishing the annual Fee Disclosures would be cost- effective, streamline the participant disclosure process and ease administrative burdens, and benefit participants and beneficiaries; and
  • Contact their administrative service provider, if the service provider is responsible for preparing and distributing the Fee Disclosures, to determine the service provider’s intended or recommended approach.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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