The Department of Labor (DOL) has been talking about retirement plan fee disclosure regulations for over a year now. The final regulations are in, and this week the DOL just issued details about electronic delivery of plan fee disclosure notices. No more delays – the second quarter of 2012 is going to be here in no time!
Plan-level fees probably won’t frighten too many plan Fiduciaries; they’ve been looking at those (or should have been) for years now. What’s new is the contractual requirement that all fees must be disclosed in writing, and the contract must be modified if those fee rates change. Failure to have a contractual agreement between a service provider and a plan will result in a Prohibited Transaction! You can bet that those contracts will be flying in the first quarter of 2012.
Participant-level fees are a different story. Employees may be surprised to know there are fees being charged on the investments in their 401(k) plans. What’s new is that the fees being charged will now be in their faces starting with the June 30, 2012 statements. Fees charged to each account will appear on the quarterly participant statements as a separate listing and in a new annual plan fee disclosure document.
Fees included in the disclosure consist of investment management fees, recordkeeping fees, administration fees, charges for participant-driven requests, etc. When these get added up and the math converts the fee from a “basis points” charge to hard dollar amounts, the numbers may shock some plan participants. The participant-level plan fee disclosure rules apply only to plans that have participant-directed investment options (e.g., ERISA §404(c) plans).
As a Plan Sponsor, employers should be ready for the new fee disclosure rules:
4/1/2012 - Contracts outlining fees charged to a plan should be in place (plan-level fees)
5/31/2012 - The annual plan fee disclosure document must have been delivered to plan participants, including active participants, eligible but non-active participants, newly eligible participants, and beneficiaries of deceased participants (participant-level fees)
8/14/2012 - Statements for the second quarter that include a separate line item for fees paid during the quarter must be delivered to plan participants (participant-level fees)
The DOL has taken a firm stand on making sure participants are provided with information about the investments they choose for their retirement plan account. This information may end up creating more questions than answers, at least at first. We strongly recommend all plan trustees, committee members, human resources staff, and payroll clerks be provided with advance notice about the new requirements and what the information for their plan participants will look like.
Want your very own copy of our updated retirement plan fee disclosure guidelines?
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