New DOL Participant Fee Disclosure Requirements
The Department of Labor recently published new regulations concerning participant fee disclosure. I can almost guarantee that 90% of plan sponsors haven't a clue about these new regulations. This is an opportunity for you to position yourself as an expert and bring something that is truly important to their attention.
These new regulations provide you with a legitimate reason to make contact with prospective clients
who may have been putting you off. There is a compliance deadline associated with these regs, so you
have the added benefit of urgency in making your call to action.
The following article comes from the July/August issue of Defined Contribution Insights. This
is a must-read article for qualified plan professionals re: the Department of Labor's
participant-fee disclosure requirements for 2012 and beyond.
Compliance Watch - Participant Fee Disclosure
A checklist for fiduciaries.
By Ian Kopelman
Any defined contribution plan fiduciary who has not begun to think about compliance with the
DOL's participant fee disclosure requirements needs to start thinking about it — now. The
rules require initial and annual disclosures of general information and quarterly
statements of the specific fees and expenses charged to a participant's account and are
generally applicable January 1, 2012 for calendar year plans.
A recent notice issued by the DOL clarifies that plan administrators have a 120-day
transition period for providing the first annual disclosure to current participants in the
first year the rules apply. This means that in 2012 the general fee disclosure to current
participants in a calendar year plan must be made by April 30, 2012 and the first disclosure
of specific fees and expenses charged to a participant's account must be distributed to
participants by May 15, 2012.
The following checklist is intended to help plan administrators gather the necessary
information and prepare the required disclosures so they can meet these deadlines
which will be here sooner than you think.
First Annual Disclosure
Due April 30, 2012
1. Identify plan-related Information.
• General information
- how and when participants can give investment instructions;
- any restrictions, such as limits on transfers among investment alternatives;
- if applicable, plan rules on voting, tender, or similar rights;
- all designated investment alternatives and investment managers; and
- any brokerage window or similar arrangement.
• Information regarding plan administrative expenses
- fees and expenses for general administrative services (legal,accounting, recordkeeping, etc.) which may be charged againstindividual participant accounts but not included in investment alternatives total operating expenses; and
- whether charges will be allocated to individual accounts pro rata or per capita and how charges willaffect individual account balances.
- Information regarding individual expenses — fees and expenses charged to individual
participant accounts, such as fees for loan processing, QDROs, investment advice, brokerage
windows.
2. Identify investment-related information based on the latest available data.
• Name, address, and telephone number of plan administrator or its designee to request for
free paper copies of information.
• Specific information for each designated investment alternative
- the name and type or category investment, such as money market fund, balanced fund, or large-cap stock fund;
- if return is not fixed, 1-, 5- and 10-year average annual total returns (or life of investment if shorter); and
- if return is fixed or stated, the annual rate of return and term of investment or minimum guaranteed rate if rate of return is adjustable, and how to obtain most recent rate of return.
• If return is not fixed, name and returns of a broad-based market index over 1-, 5- and 10-year returns (or life of investment, if necessary) which is not administered by an affiliate of the investment issuer or adviser as benchmark.
• Fee and expense information
- if return is not fixed:
• amount and description of fees charged directly against participant's investment;
• total annual operating expenses expressed as a percentage and as a dollar amount per
$1,000 for 1-year period; and
- if return is fixed, amount and description of shareholder type fees and any transfer restrictions.
• Internet website for more specific information about investment.
• Glossary of terms.
3. In the case of an annuity option, identify other information.
• Contract name.
• Investment objectives and goals.
• Benefits and factors that determine the price (age, interest rates, form of distribution);
• Limitations on withdrawals or transfers and applicable fees.
• Fees that will reduce the value of participant's investment (surrender charges, market
value adjustments and administrative expenses).
• An internet website that provides more information about the issuer, investment
objectives, distribution options, costs and or factors taken into account under each option,
transfer and withdrawal limitations and applicable fees.
4. Present investment-related information in a comparative chart or format similar to the
model provided by the DOL, prominently display the date and include certain information in
addition to that described above.
• A statement that additional information is available on the investment's
website and explaining how to obtain paper copies of the additional
information.
• A statement that past performance is not an indicator of future returns.
• A statement that fees and expenses are only one factor to be considered and that
cumulative effect of fees and expenses can reduce account growth over time.
• A description of any restrictions on transfers.
Quarterly Disclosure Due May 15, 2012
1. Identify dollar amount of plan administrative expenses actually charged to participant's
account during preceding quarter.
2. Identify dollar amount of individual expenses actually charged to participant's account
during preceding quarter.
3. Include descriptions of services to which each of the above charges relate.
4. If applicable, include an explanation that in addition to the fees disclosed, some of
the plan's administrative expenses were paid from investment alternatives' total
operating expenses.
General Rules
1. Plan-related and administrative expense information can be disclosed in SPD or benefit
statements if they are distributed often enough.
2. DOL electronic disclosure rules apply.
3. The model DOL disclosure for investment expense information does not have to be used,
but if it is used, the disclosure will be deemed to satisfy the regulations.
4. After April 30, 2012, the general disclosures must be made on or before the date the
participant or beneficiary first becomes eligible to direct investments under the plan and
annually thereafter.
5. Any changes in operational and identification information, administrative expenses, or
individual expenses must be disclosed at least 30 but no more than 90 days before the
effective date of the change. If it is impossible to meet this deadline, the change must be
disclosed as soon as practicable.
6. Statements disclosing information specific to individual participant accounts must be made quarterly.
Ian Kopelman is a partner at DLA Piper LLP (US).
Ian is also PSCA's legal counsel.
Defined Contribution Insights is a publication of the Profit Sharing/401k Council of America
(PSCA). PSCA is a national non-profit association of 1,200 companies and 6 million employees
advocating increased retirement security through profit sharing, 401(k) and related defined
contribution programs to federal policymakers. PSCA also provides practical assistance with
profit sharing and 401(k) plan design, administration, investment, compliance and
communication to its members. Go to www.PSCA.ORG for further information.
Posted by Larkspur Data Resources at 9/7/2011 4:43 PM 
Categories: Governmental Actions, Marketing Techniques, Marketing Concepts
Tags: Fiduciary Liability
Categories: Governmental Actions, Marketing Techniques, Marketing Concepts
Tags: Fiduciary Liability
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