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On May 7, 2012, the Department of Labor released
Employee Benefits Security Administration Field Assistance Bulletin
2012-2, which offers guidance in the form of "Frequently
Asked Questions" on the fee disclosure rules for
participant-directed individual account plans under section 404(a)
of ERISA. The new guidance amplifies the requirements under these
rules, which generally take effect August 30, 2012, and provides
guidance coordinating these rules with the separate
service-provider fee disclosure rules that generally take effect
July 1, 2012. The DOL also stated in a press release that it is
working on a second set of FAQs to address the service provider
rules.
The participant-level fee disclosure rules apply to plan
administrators of "covered individual account plans,"
including most participant-directed plans. The rules require plan
administrators to provide disclosure on specified plan features,
including administrative fees, and certain investment-related
information, including descriptions of designated investment
alternatives and current information on fees and expenses charged
by those investment alternatives.
The new guidance, consisting of 38 FAQs, clarifies a number of
points in the final regulations. Highlights include:
Frozen investment options. The guidance clarifies that
disclosures generally must be made even for designated investment
alternatives that are closed to new investments.
Total annual operating expenses. The guidance provides
clarification on how to report total annual operating expenses for
certain designated investment alternatives other than mutual funds
– for example, unregistered funds, funds of funds,
managed accounts that invest in mutual funds, and stable value
funds.
Plan administrative expenses. The guidance provides
examples illustrating the level of detail that should be provided
when disclosing fees and expenses for administrative services, and
clarifies that if administrative expenses are not charged against a
participant or beneficiary's account (e.g., if expenses are
normally paid by the employer) they generally do not have to be
disclosed.
FAB 2012-2 also states that if initial disclosures made when the
rules take effect do not reflect the new information contained in
this guidance, the DOL will, for enforcement purposes, take into
account whether the plan administrator has made its disclosures in
good faith based on a reasonable interpretation of the regulations
and has established a plan for ensuring full compliance.
Ropes & Gray's earlier alert on the participant-level
fee disclosure regulation is available
here, and our alert describing the service-provider fee
disclosure regulation is available
here.
As a reminder, new electronic disclosure rules applicable to
certain of these disclosures call for participants and
beneficiaries to be sent an opt-out notice 30 to 90 days prior to
the date of the initial disclosure. With disclosures for many plans
being due by August 30, 2012, the period for providing notice is
rapidly approaching. Our alert generally describing special rules
for using electronic communications to provide certain disclosures
may be found
here.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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