Yesterday, the U.S. Department of Labor issued final rules regarding disclosure of 401(k) retirement-plan fees by plan service providers. Under prior guidance, the effective date for the disclosures was April 1, 2012. The final regulations issued today extend this date by three months to July 1. Service providers not in compliance as of July 1, 2012, will be subject to the prohibited transaction rules and penalties of ERISA and the Internal Revenue Code.
The fee disclosure rules apply to covered service providers that work with 401(k), 403(b), and all other ERISA retirement plans, such as investment managers and prototype plan administrators. These service providers must disclose to employers the specifics about fees charged for services, including those for money management and retirement plan administration.
Employers are reminded that the final regulation’s new July 1 effective date will also affect when fee and investment disclosures must first be furnished to plan participants. The transition rule for disclosures to participants requires the disclosures to be made within 60 days of the effective date for disclosures by service providers. Consequently, employers with calendar year plans must furnish the information no later than August 30, 2012 (i.e., 60 days after the 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 quarter during which initial disclosures were first required). The quarterly statement need only reflect the fees and expenses actually deducted from a participant’s account during the quarter to which the statement relates.
If you have questions regarding the information in this client alert, or with respect to other legislation as it relates to your employee benefits plans, please contact any of the attorneys in our Employee Benefits Practice Group.