After several annual cycles of participant fee disclosures, sponsors of participant-directed retirement plans have discovered that sometimes pulling together the relevant information from vendors and issuing timely disclosure notices can be a challenge. That makes the Department of Labor’s recent rule change – giving plan sponsors an extra, two-month window each year in which to provide the participant fee disclosures – particularly welcomed.
The 2010 participant-level fee disclosure regulations require participants and beneficiaries in participant investment directed retirement plans to receive, or have access to, the information they need to make informed plan and investment decisions, including information about fees and expenses, with the delivery of investment-related information in a format that enables them to meaningfully compare the investment options under their retirement plan. In general, the regulations require the participant disclosures to be provided on or before the date a participant can first direct his or her investments, and at least annually thereafter. The regulations and subsequent DOL guidance interpreted the timing rule strictly, requiring the annual disclosure to be provided no later than one year exactly (e.g., 365 days) after the prior annual disclosures.
Guidance issued in 2013 allowed plan sponsors a one-time ‘reset’ opportunity under which the ‘at least annually’ requirement was satisfied if the annual participant disclosures were provided no later than 18 months from the prior disclosures. This allowed plan sponsors to move the timeframe for giving the disclosures to a more convenient time of the year, often a time when other plan-related notices already were being provided.
The recent relief provides an extra, two-month period during each annual disclosure cycle in which to provide the disclosures by changing the definition of ‘at least annually’ under the regulations to “at least once in any 14-month period”. This extra, two-month period eliminates the potential for the deadline to creep earlier each year, and provides plan sponsors with more flexibility if they want to change the time of year the disclosures are provided. In most cases plan sponsors will want to rely on this change merely to provide a buffer for unexpected delays in obtaining required information or preparing and distributing the disclosures so they can continue to provide the disclosures at the same time each year.
There are a few wrinkles to keep in mind. This rule change automatically becomes effective June 17, 2015, and retirement plan sponsors can rely on the change until the effective date only if it is reasonably determined that using the extended deadline will benefit participants and beneficiaries. In addition, if the DOL receives significant adverse comment by April 20, 2015 on the rule change, they can withdraw the change, delaying the effective date and providing further guidance on whether sponsors can continue to rely on the rule change until new guidance is issued.
Gene Griggs, an attorney no longer with Poyner Spruill, was the original author of this article.