The Department of Labor’s Employee Benefits Security Administration (the “EBSA”) has released its final rule, in the form of ERISA regulations, on the disclosure of fees and expenses to participants in defined contribution retirement plans. The EBSA has also issued a Fact Sheet which describes the final rule. Here is what the Fact Sheet says.
The final rule contains the following categories of information:
—Plan-Related Information. This includes general information about the plan, administrative expense information and individual expense information. This information must be given to participants by no later than the first date on which they can direct the investment of their individual accounts and annually thereafter. In addition, participants must receive statements, at least quarterly, showing the dollar amount of the plan-related fees and expenses (whether “administrative” or “individual”) actually charged to or deducted from their individual accounts, along with a description of the services for which the charge or deduction was made. These quarterly disclosures may be included in the quarterly benefit statements required under section 105 of ERISA.
—Investment-Related Information. This information includes investment performance data, benchmark information and fee and expense information pertaining to plan investment options. This information includes the address of an internet Web site at which additional information may be found. It also includes a general glossary of terms, or the address of an internet Web site where a glossary may be found. The investment-related information must be furnished to participants no later than by the first date on which they can direct the investment of their individual accounts, and annually thereafter. The information must be furnished in a chart, or similar format, designed to facilitate a comparison of each investment option available under the plan. The final rule includes a model comparative chart in the appendix (the model chart is currently available on the EBSA website).
Other Information in the Fact Sheet:
–The final rule provides plan administrators with protection 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.
–After a participant has invested in a particular investment option, he or she must be provided with any materials the plan receives regarding voting, tender or similar rights in the option.
–Upon request, the plan administrator must also furnish prospectuses, financial reports and statements of valuation and of assets held by an investment option.
–The general disclosure regulation at 29 CFR § 2520.104b-1 applies to material furnished under this regulation, including the safe harbor for electronic disclosures at paragraph (c) of that regulation. The final rule would also make conforming changes to the disclosure requirements for plans that elect to comply with the existing ERISA section 404(c) regulations.
Effective and Applicability Dates:
• The final rule will be published on October 20, 2010.
• The final rule will become effective beginning on December 20, 2010.
• The final rule will become applicable to defined contribution plans for plan years beginning on or after November 1, 2011. For calendar year plans, compliance will be required on January 1, 2012.