DOL Issues Retirement Plan Transparency Rule

The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued a final rule (pdf) that requires retirement plan sponsors and fiduciaries to disclose certain plan and investment-related information, including that related to fees and expenses, to participants and beneficiaries in participant-directed individual account plans, such as 401(k)s. As explained in a news release, the rule is intended to “ensure that all workers who direct their plan investments have access to the information they need to make informed decisions regarding the investment of their retirement savings, including fee and expense information. Under the rule, workers will receive this information in a format that enables them to meaningfully compare the investment options under their plans.” This rule will impact plan sponsors, fiduciaries, participants and beneficiaries of participant-directed individual account plans, as well as providers of services to such plans.

Specifically, as stated in the release, the rule will mandate that plan fiduciaries do the following:

  • Provide workers with quarterly statements of plan fees and expenses deducted from their accounts.
  • Provide workers with core information about investments available under their plan including the cost of these investments.
  • Use standard methodologies when calculating and disclosing expense and return information to achieve uniformity across the spectrum of investments that exist in plans.
  • Present the information in a format that makes it easier for workers to comparison shop among the plan’s investment options.
  • Give workers access to supplemental investment information in addition to the basic information required under the final rule.

A fact sheet discussing the types of plan-related and investment-related information that must be provided can be found here. The fact sheet also emphasizes that this information must be provided in such a format as to allow individuals to more easily compare their investment options. The DOL has released a model comparison chart that displays performance information for plan investment options, their corresponding fees and expenses, and information about the annuity options for a sample retirement plan.

Under the rule, plan administrators are not liable for the completeness and accuracy of information provided to participants if the administrator “reasonably and in good faith” relies on the information provided by a service provider.

The rule will take effect 60 days after publication in the Federal Register, which is scheduled for October 20, 2010. The effective date notwithstanding, the rule and its amendments will apply to individual account plans for plan years beginning on or after November 1, 2011.

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Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.