Revised Timeframe for Providing Annual Disclosures to Participants of Participant-Directed Individual Account Plans

In response to comments from various organizations representing employers, plans, recordkeepers, and other service providers, the U.S. Department of Labor (“DOL”) published a rule revising the timeframe for administrators to provide certain expense and investment annual disclosures to individuals participating in “participant-directed individual account plans” (e.g., 401(k) plans and 403(b) plans).  If implemented, the rule requires that participants receive the annual disclosures at least once in a 14-month period.  The current rule calls for the annual disclosures at least once every 12 months. 

In general, participants and beneficiaries of participant-directed individual account plans must receive certain information about the plan’s expenses and investment alternatives at two times: (1) on or before the date a participant/beneficiary can first direct investments; and (2) at least annually thereafter.  DOL regulations currently define “at least annually thereafter” as “at least once in any 12-month period.”  The DOL has explained that if a plan administrator furnished the annual disclosure on August 25, 2012, the plan administrator had to provide the 2013 annual disclosure no later than August 25, 2013. 

Commenters raised the following practical and logistical concerns regarding the current 12-month deadline, chiefly a lack of flexibility: 

  • It prevented plan administrators from consolidating this annual disclosure with the plan’s other required annual disclosures, by overloading participants with plan information too frequently;
  • It was administratively burdensome – large recordkeepers had to track the specific 12-month anniversary on a plan-by-plan or even participant-by-participant basis;
  • It disincentivized  early disclosures in a given year – because it “reset” the 12-month anniversary deadline; and
  • It could be difficult to meet because different investment vendors did not always provide certain investment information on a predictable, timely basis. 

The new rule will be effective June 17, 2015, unless significant adverse comment is received by April 20, 2015.  In the case of significant adverse comment, the DOL will withdraw the 14-month rule.  However, there is a temporary enforcement policy.  Effective immediately, plan administrators will satisfy the timing requirement by providing the annual disclosures once every 14 months, as long as the plan administrator reasonably determines that doing so will benefit participants and beneficiaries.  This temporary enforcement policy expires on June 17, 2015.  If the 14-month rule is withdrawn, the DOL will provide further guidance.  

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.