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The Department of Labor Issues Relief for Annual Participant-Level Fee Disclosures

Employee Benefits Law Alert Sarah L. Fowles, Angela Marie Hubbell

Background of Participant-Level Fee Disclosures

Plan administrators of account-based plans were first required to distribute new (and extensive) annual participant-level fee disclosures to plan participants and beneficiaries by August 30, 2012 (for some non-calendar year plans, the deadline was later). The annual participant-level fee disclosures contain three broad categories of information:

  1. General Plan-Related Information - This category of information includes explanations of how participants select their investments and the types of limits, if any, that apply to investment instructions.
  2. Administrative and Individual Expenses Charged Against Accounts - This category of information includes details about the administrative and individual expenses that can be charged against an individual's account.
  3. The Comparative Chart - The Comparative Chart includes information about each investment alternative's operated expenses, shareholder-level fees, websites, benchmarks, and performance.

Following distribution of the initial fee disclosures, pursuant to U.S. Department of Labor ("DOL") regulations, plan administrators have an ongoing obligation to distribute fee disclosures again at least once every 12-month period. Thus, a plan administrator who initially distributed the fee disclosures on August 25, 2012, would be required to distribute the next set of fee disclosures no later than August 25, 2013.

The Problem

Distribution of the participant-level fee disclosures has proved to be burdensome and expensive for many plan administrators. This is because compliance with the DOL's electronic disclosure rules is so cumbersome that many plan sponsors have chosen to distribute the fee disclosures in hard copy by regular mail, and because the disclosure documents prepared by many third party administrators are quite lengthy (we have even heard of 300 page disclosure documents!). In addition, the timing of the August deadline for the fee disclosures increases costs because it does not correspond to the timing requirements of any other required plan communication with participants.

Under existing regulations, a plan administrator can change the 12-month period by distributing two sets of fee disclosures during the same 12-month period. For example, a plan administrator who furnished the disclosures on August 25, 2012, could have distributed them again in January of 2013 to change the 12-month period to begin in January. However, most plan administrators would not want to do so because of the potential for participant confusion and the extra mailing and administrative costs.

DOL Solution

On Monday, July 22, 2013, the DOL issued Field Assistance Bulletin 2013-02 (the "FAB"). The FAB announces a temporary enforcement policy under which the DOL will permit a plan administrator to distribute the 2013 fee disclosures no later than 18 months after the initial fee disclosures were distributed. For example, if a plan administrator distributed the first fee disclosures on August 25, 2012, the DOL would take no enforcement action if the plan administrator distributes the 2013 fee disclosures by February 25, 2014.

The DOL recognizes that some plan administrators have already distributed the 2013 fee disclosures or are far along the path of doing so. If such a plan administrator distributes the 2013 fee disclosures within 12 months of distributing the ones sent in 2012, it can still obtain relief under the FAB. For such a plan administrator, the DOL would take no enforcement action if the 2014 fee disclosures are distributed no later than 18 months after the 2013 fee disclosures are distributed. For example, if a plan administrator distributed the initial fee disclosures on August 25, 2012, and distributes the second fee disclosures on August 25, 2013, the DOL would take no enforcement action if the plan administrator distributes the 2014 fee disclosures by February 25, 2015.

The FAB will thus permit plan administrators greater flexibility in choosing the timing of the fee disclosures, and the DOL has advised that it is considering increasing that flexibility by revising the current fixed deadline to a 30-day or 45-day window during which disclosures could be provided. We are hoping that the DOL will also tackle the electronic disclosure requirements in a way that provides plan administrators additional flexibility in making the disclosures electronically.

The obligation to provide fee disclosures to plan participants is just one of the many obligations of a retirement plan fiduciary under ERISA. To help fiduciaries better understand and meet their ERISA obligations, Quarles & Brady is offering an affordable flat-fee fiduciary training package. For more information, click here.

For more information, contact the authors of this alert: Sarah Fowles at (414) 277-5287 / sarah.fowles@quarles.com or Angie Hubbell at (312) 715-5097 / angie.hubbell@quarles.com. You may also contact any of the following Quarles & Brady employee benefits attorneys: Marla Anderson at (414) 277-5453 / marla.anderson@quarles.com; John Barlament at (414) 277-5727 / john.barlament@quarles.com; Amy Ciepluch at (414) 277-5588 / amy.ciepluch@quarles.com; Alyssa Dowse at (414) 277-5607 / alyssa.dowse@quarles.com; David Olson at (414) 277-5671 / david.olson@quarles.com; Robert Rothacker at (414) 277-5643 / robert.rothacker@quarles.com; or your Quarles & Brady attorney.