What: In 2012, Department of Labor (DOL) rules went into effect requiring plan administrators of ERISA-covered plans with participant-directed investments to make specified disclosures of plan fee and investment information to:
- Active participants (those who are actively directing their accounts); and,
- Inactive participants (those who are eligible to participate or defer, but do not have an account)
In general, the rules require the written disclosure of:
- The plan’s investment options and how participants can direct their investments;
- The plan-level administrative service fees that are charged to participant accounts;
- Fees that are charged to participant accounts on an individual basis (e.g., loan initiation and fees for investment advice programs);
- The dollar amount of fees and expenses that were actually charged to each participant’s account during the preceding quarter; and
- The investment performance and fees of most plan investment options, shown in a comparative format (the DOL has provided a sample format).
Who: Responsibility for providing the disclosures falls on the ERISA plan administrator. This is not the plan’s third party administrator or contract service provider. In many cases this may be the plan’s sponsor. Make sure you are clear on who the plan administrator for a plan actually is.
How: Generally, the disclosures must be provided to participants in writing. Furthermore, each plan must provide web address for each investment option where detailed investment information may be obtained.
Fortunately, the disclosures need not be prepared by the plan administrator. It is acceptable for the plan administrator to arrange for the plan’s service providers and investment providers to prepare the suggested disclosures and the plan administrator may rely on the information provided, if it can do so on a reasonable and good faith basis. However, it is always the responsibility of the plan administrator to oversee the timely preparation and distribution of the required notices and disclosures.
A word of caution: If your plan is being operated as an ERISA section 404(c) plan, such that the plan’s fiduciaries are not intended to be responsible for the consequences of participants’ investment directions, you must comply with these new rules or run the risk of losing your 404(c) protection.