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.
The participant-level fee disclosure requirements that became effective in 2012 put in place a comprehensive framework of information that plan administrators need to disclose to defined contribution plan participants who manage investments in their accounts. One of the key requirements is that certain information needs to be given on or before the date a participant or beneficiary can first direct his or her investments and at least annually thereafter. DOL Field Assistance Bulletin 2013-02 issued July 22, 2013 (the “Bulletin”) provides relief on the burden imposed by multiple disclosure requirements for those plans that want to “reset” their annual reporting clock, as explained in more detail here.
Because the deadline for the first participant fee disclosures was tied to the first set of 408b-2 disclosures by service providers to plans, the first set of participant fee disclosures was due within 60 days of July 1, 2012 (the 408b-2 deadline). So, nearly all plans made their initial participant fee disclosures in July and August of 2012 and are facing the first “annual” update in July and August of 2013.
For many plans, this timing for the annual updates does not synchronize with other participant disclosures. However, if a plan wants to establish another annual update deadline, the plan would be required to make two disclosures to “reset” the annual clock. For example, a plan that wants to make disclosures in November will need to disclose now (to line up with the anniversary of the initial disclosures) and then again in November (to establish the new deadline for future years).
The Bulletin recognizes the need for this reset and the burden that a second disclosure would impose on a plan and attempts to address these points. The Bulletin permits a plan to give an update for 2013 on a date that is no later than 18 months after the initial (2012) disclosure. This would permit most plans to make their 2013 disclosure no later than January or February of 2014 instead of July or August of 2013. In addition, if a plan has already given its 2013 disclosure or “incurred costs and taken other steps” toward making that disclosure, the plan may furnish its 2013 disclosure on the existing schedule and the 2014 disclosure within 18 months after the 2013 disclosure. This would permit a plan to reset the annual timing through what would otherwise be next year’s disclosure (which for most would extend the July/August 2014 disclosure deadline to January or February of 2015). The DOL notes that this reset is one-time relief measure.
The Bulletin leaves one question to be addressed: how strictly we need to read the specified conditions for the 2014 relief. Specifically, the Bulletin says that a plan may delay the 2014 disclosure if the plan has already given the 2013 disclosure or it has “incurred administrative costs and taken steps.” Based on that language, if the plan has taken administrative steps but no costs have been incurred with respect to the 2013 update (or vice versa), a strict reading of the Bulletin would lead to the conclusion that the only option available to the plan is a 2013 reset (even though the plan may be nearly ready to issue the 2013 update). Given the broad rationale for the relief, it is likely that the DOL is seeking to provide the reset opportunity to all plans for 2013 or 2014, at the plan’s election.
The DOL closes the discussion in the Bulletin by indicating it is considering flexibility on the fixed annual deadline in the regulations. Thus, it is considering whether the “annual” requirement would continue to impose a deadline that is exactly 12 months after the prior disclosure or whether it will provide a more flexible 30 or 45 day window. The Bulletin also makes clear that the DOL is merely stating an enforcement position and that the relief does not affect other matters, such as participant claims related to the failure to provide information related to investments. We will continue to follow this issue and provide updates as needed.