Putney, Twombly, Hall & Hirson LLP
521 Fifth Avenue
New York, NY 10175
Tel: (212) 682-0020


June 5, 2012

Deadlines for Retirement Plan Fee Disclosures Coming Soon

Service Provider Fee Disclosure Deadline

In February, the Department of Labor (DOL) issued final regulations concerning disclosures that plan service providers are required to provide to retirement plan sponsors and other fiduciaries regarding the costs of their services to the plans so that the appropriate fiduciary may consider if the fees are reasonable as required by ERISA Section 408(b)(2). The regulations may be found here.

The required disclosure consists of a written explanation of fees received in connection with the administrative and investment services provided to retirement plans.  While the burden is on the service providers to voluntarily proffer these disclosures to the appropriate plan fiduciaries, it is the responsibility of plan fiduciaries or employers to ensure that the service providers to their plans are identified, that their contracts with the plan are in writing, and that proper disclosure of fees paid by the plan has been made by the service provider as required by the new law.  These precautionary measures are necessary because causing a plan to pay more than reasonable fees for plan services, or to enter into agreements that involve conflicts of interest, is a prohibited transaction for which a plan fiduciary may be held liable as well as the service provider.

The deadline for the plan service providers to provide fee disclosures to employers and fiduciaries is July 1, 2012.

Participant Fee Disclosure Deadline Also Looming

The second part of the DOL’s new regimen aimed at making plan investment costs more transparent to plan fiduciaries and plan participants are the participant-level disclosures which will now be required on a regular and periodic basis. These disclosures apply to participant-directed defined contribution plans that are subject to ERISA and not to defined benefit plans.  Based in part on the information received from the service providers, the plan sponsor or fiduciary must provide detailed information to participants, including the identity of the plan’s investment managers, the designated investment alternatives offered by the plan, and the fees related to the various alternatives.  This information is designed to enable employees to consider investment costs when making decisions regarding the management of their accounts. An explanation of the plan’s administrative expenses and how they are allocated is also required. 

The initial participant-level disclosures must be made 60 days after the date the plan first becomes subject to the participant regulations issued under ERISA Section 404(a).  For most plans this will be on or before August 30, 2012 (and on or before November 14, 2012 with respect to quarterly statement disclosures) for calendar year plans.  If a plan’s first plan year after November 1, 2011 starts on or after July 1, 2012, then initial participant disclosures must begin no later than 60 days after the first day of the plan year.       

The regulations on participant disclosures issued in November 2010 may be viewed here  

*          *          *

If you have any questions regarding compliance with the plan fee disclosure requirements for your employee retirement plan, please do not hesitate to contact us.