ERISA-DOL Seeks, And Receives, A No Action Letter From SEC Regarding New Participant Fee Disclosure Rules

The Department of Labor (the “DOL”) has formally asked the Security Exchange Commission (the “SEC”), in a letter dated October 26, 2011, to issue a “no action” letter pertaining to a plan administrator’s compliance with the new participant fee disclosure regulation.

The new regulation (29 CFR section 2550.404a-5) was issued on October 20, 2010. It requires the plan administrator of a participant-investment directed individual account plan to disclose plan and investment-related information to the participants. The DOL expects the disclosures to begin in June, 2012. The information to be disclosed includes specified performance, benchmarking and fee information.

The DOL is concerned with the disclosures required to be made under Rule 482 under the Securities Act of 1933. Rule 482 has certain advertising rules which are not found in the new regulation. For example, unlike the new regulation, Rule 482 requires a statement, as to any money market fund, that the fund is not insured by the Federal Deposit Insurance Corporation, or any other government agency, and requires disclosure of the fund’s current yield. The DOL believes that, if applied to the disclosures required under the new regulation, Rule 482 would greatly complicate compliance with the regulation. In fact, the DOL indicated, in the preamble to the regulation, that the SEC would issue this no action letter. Hence, the DOL has now formally requested a no action letter, which assures that a plan administrator’s compliance with the new regulation will not result in any action by the SEC related to Rule 482.

The SEC responded, issuing the no action letter on the same day (October 26). This letter states that ” we [the SEC] agree to treat information provided by a Plan Administrator to Plan Participants…that is required by and complies with the disclosure requirements set forth in the DOL Rule [that is, the new regulation] as if it were a communication that satisfies the requirements of Rule 482 under the Securities Act”.

The bottom line-a plan administrator complying with the new regulation pertaining to participant fee disclosure need not be concerned about Rule 482.

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