EBSA Proposes to Extend Applicability Dates for Fee Disclosure Rules

The DOL’s Employee Benefits Security Administration (EBSA) has issued a notice (pdf) of its proposal to extend the applicability date of two fee disclosure rules in order to ensure that plan sponsors have enough time to comply with the rule requirements. Specifically, the EBSA is proposing to push back the applicability dates of the fiduciary-level fee disclosure rule issued on July 16, 2010 and the transition rule included in the participant-level fee disclosure regulation  issued on October 20, 2010.

The interim final rule issued in July sets forth enhanced disclosures that certain pension plan service providers must give to plan fiduciaries as part of a “reasonable” contract or arrangement for services under section 408(b)(2) of ERISA. Unless extended, the date this rule is scheduled to take effect is July 16, 2011. In February, the EBSA announced its intention to extend this applicability date to January 1, 2012. The EBSA’s notice to be published in the Federal Register, if finalized, will effectuate this announcement.

The final participant-level disclosure rule issued in October 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. The provisions of this regulation apply to plan years beginning on or after November 1, 2011. These regulations also include a transitional rule for providing disclosures required on or before the date on which a participant or beneficiary can first direct his or her investment. This transitional rule provides that the plan must provide the new disclosures no later than 60 days after participants or beneficiaries have the right to direct the investment of their individual accounts. The EBSA’s proposal would allow a plan to furnish these initial disclosures within 120 days, rather than the current 60. Additionally, under the EBSA’s proposal, plans would have to furnish initial disclosures to all participants and beneficiaries who have the right to direct their investments when such disclosures are furnished, not just to those who had the right to direct their investments on the plan applicability date. The purpose of this change “is to ensure that individuals who become plan participants in between the applicability date and the end of the 120-day period receive the important information required under the regulation.”

Comments on these proposed extensions must be received within 14 days of the EBSA’s Federal Register notice, which is scheduled to be published on June 1, 2011. Comments may be submitted electronically to e-ORI@dol.gov, or via the federal eRulemaking portal or by mail or hand-delivery to: Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N–5655, U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210, Attention: Fee Disclosure Applicability.

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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.