Sign up for our Assurance University webinar titled “Recent Regulatory Changes Affecting 401(k) Plans” for more on this topic.
The U.S. Department of Labor has issued fee disclosure rules in an effort to ensure transparency in the retirement plan market. These rules require that retirement plan providers give more details about the costs of their services, which will encourage employers to be savvy consumers when it comes to their plans.
These disclosure requirements have two layers: the 408(b)(2) sponsor disclosure regulation and the 404(a) participant disclosure regulation. A brief synopsis of the two regulation requirements are as follows:
1. The 408(b)(2) sponsor disclosure regulation mandates that each service provider must disclose the fees and compensation incurred for the plan services rendered. It is intended to aid the plan fiduciaries in determining whether fees are reasonable.
2. The 404(a) participant disclosure regulation requires that participants are notified of plan-related and investment-related disclosures on an initial and quarterly basis. This includes, but is not limited to, information such as:
- Fees and expenses, both to the plan as a whole and charged to individual accounts
- Historical fund performance data for one, five, and ten year periods
- Investments available under the plan
- Directions on how participants can direct investments
- Market benchmarks
Final Regulations on Fee Disclosures
The final ruling has established a July 1, 2012 effective date for the 408(b)(2) regulation. This is a three month extension on the previously communicated April 1, 2012 effective date. The new date will give retirement plan service providers more time to smooth out their final plans for regulation compliance.
Working in conjunction with the 408(b)(2) sponsor disclosure is the 404(a) participant disclosure regulation; since the two regulations are based upon one another, the effective date of the 404(a) participant disclosure regulation has also been delayed. Initial disclosure notices to eligible employees are now due by August 30, 2012, and the first quarterly statement to include the new fee disclosure information must be provided by November 14, 2012.
As the effective date gets closer, you might have questions on updates and necessary information surrounding your plan. For more in-depth answers, attend our Assurance University webinar titled “Recent Regulatory Changes Affecting 401(k) Plans” on Thursday, April 5. Click here to register or learn more about the webinar, as well as available continuing education credits.