July 1, 2012 is the final deadline for the Department of Labor’s new fee disclosure regulations to go into effect. The deadlines changed from our blog post in September 2011. Following are the new critical deadlines:
July 1 - A written service agreement between sponsors of retirement plans and all plan providers need to be in place
August 30 - Annual fee disclosure notice will need to be provided to participants of plans that allow participants to direct their own investments in the plan
November 14 - Quarterly reports delivered to plan participants will have to include a separate line item for fees charged to the plan during the quarter
I’ll drill down a little on each of the three items outlined above.
Written Service Agreement
Any company or person that provides services to the plan and receives direct or indirect compensation from plan assets is considered a Covered Service Provider. This includes investment advisors, auditors, appraisers, record keepers, and TPAs. Failure to have a contractual agreement between a service provider and a plan will result in a Prohibited Transaction!
Annual Notice
Every year participants must receive an update that includes information about each investment option within the plan. The deadline for providing the first of these Annual Notices is August 30, 2012, and at least once every 12 months after that.
Most investment custodians will be preparing these Annual Notice reports in time to meet the deadline. The Plan Sponsor must make sure that the Annual Notice is delivered to all employees who are eligible for the plan even if they are not currently participating.
The Annual Notice includes these items:
1. The category or “Asset Class” of the investment.
2. The name of the company managing the investment, the manager’s name, and the company’s website address will be listed.
3. Fees will be shown as both:
a. a percentage; and
b. a dollar amount per $1,000 invested
4. Gain or loss for the investment will be shown for the following time periods:
a. 1-year
b. 5-years
c. 10-years (or history-to-date if fund has not existed for 10 years)
5. The investment will be compared to others in the same category. This is called a benchmark comparison. It will show the Participants how the investment in their plan is doing when compared to other similar investments.
Quarterly Statements
Every three months, any fees that were deducted from a Participant’s account will show as a separate item on the statement that they receive for their account. The fees shown on the quarterly statement will not include any of the fees outlined in the Annual Notice. Fees that might appear on a quarterly statement include charges for distribution processing, loan requests, administration fees, etc.
This is, of course, a very simple overview of these regulations and deadlines. Call our office if you have any concerns about meeting your obligations under these new rules, or if you would like to consult with us about steps you can take to meet these new rules.
