DOL Provides Fee Disclosure Relief

The U.S. Department of Labor (DOL) released Field Assistance Bulletin (FAB) 2013-02 on July 22, 2013, which provides plan administrators of individual account plans with participant-directed investments (such as 401(k) and 403(b) plans) a one-time opportunity to reset the timing of annual fee disclosures to plan participants.

Background

The Employee Benefits Security Administration (EBSA) published participant fee disclosure regulations on October 20, 2010. These regulations require that plan administrators of participant-directed individual account plans disclose, in a comparative chart format, certain information about plan investment options. Under the regulations, which were implemented in 2012, the disclosures must be made to plan participants and beneficiaries at least annually. For calendar year plans, the first comparative chart was required to be furnished to participants and beneficiaries no later than August 30, 2012. Thereafter, plan administrators must furnish comparative charts at least annually, which the regulations define as at least once in any 12-month period.

Although the regulations permit the comparative chart to be distributed along with other annual participant disclosures (e.g., safe harbor and/or automatic enrollment annual notices), the practical effect of the initial August 30, 2012 deadline was to require plan administrators to disclose the comparative chart by the end of each August, separately from other annual disclosures. Plan administrators and service providers expressed concerns to the DOL regarding the additional administrative costs for the separate mailing—which often are borne by participants and beneficiaries.

What’s New?

The temporary relief under FAB 2013-02 offers plan administrators a one-time opportunity to reschedule the deadline for the required participant fee disclosures if the plan administrator reasonably determines that doing so will benefit the plan’s participants and beneficiaries. If a plan decides to reschedule the disclosure date, the 2013 comparative chart must be provided to participants and beneficiaries no later than 18 months after the date of the disclosure of the initial 2012 comparative chart.

For example, if a plan administrator provided the 2012 comparative chart on August 28, 2012, the 2013 comparative chart must be provided no later than August 28, 2013. Under FAB 2013-02, EBSA will not take enforcement action against the plan administrator so long as the 2013 comparative chart is provided no later than February 28, 2014.

Recognizing that many plan administrators already disclosed the 2013 comparative chart or incurred significant administrative costs preparing to disclose the 2013 comparative chart, the DOL also provided relief for the 2014 comparative chart. In such cases, a plan administrator must furnish the 2013 comparative chart within 12 months of the date of furnishing the 2012 comparative chart, but the plan administrator may furnish the 2014 comparative chart no later than 18 months following the date on which the 2013 comparative chart was provided.

For example, if a plan administrator provided the 2012 comparative chart on August 28, 2012, and intends to provide the 2013 comparative chart on August 28, 2013, EBSA will not take enforcement action against the plan administrator so long as the 2013 comparative chart is provided on August 28, 2013 and the 2014 comparative chart is provided no later than February 28, 2015.

The temporary relief granted under FAB 2013-02 affects only the deadline for disclosure of the comparative chart, and all other requirements of the regulations remain in place. Also, EBSA is considering whether to allow a 30-day or 45-day window during which a subsequent annual comparative chart would have to be furnished, rather than fixing the 12-month “at least annually” period to end on one specific day.

Next Steps

Plan administrators should review their intended timing for providing the 2013 comparative chart to plan participants and beneficiaries and consider rescheduling the disclosure of the 2013 comparative chart. If a plan administrator already provided or has taken significant steps towards providing the 2013 comparative chart, the plan administrator should consider taking advantage of the relief provided for the 2014 comparative chart.