On March 18, 2015, the Department of Labor (DOL) issued a final direct rule on the issuance of the annual fee disclosure required under ERISA Section 404(a)(5). In its communication, the DOL changed the frequency of its required participant fee disclosure from at least once every 12 months to once every 14 months. It noted that the additional two months provided by the rule are in response to comments that plan administrators need more flexibility for these annual disclosures to avoid potential unnecessary costs and administrative burden.
Under DOL regulations issued in October of 2010, administrators of calendar-year plans were required to provide participants with detailed comparisons of plan investment options and other administrative expenses paid by the plan no later than August 30, 2012. The regulations further required plan administrators to furnish this information “at least annually thereafter,” defined as at least once in any 12-month period, without regard to whether the plan operates on a calendar or fiscal year basis. Therefore, if a plan administrator provided a participant disclosure in August 2012, it had to provide this information again by the same day in August 2013.
Many plan administrators expressed concern about this timing. In response to these concerns, the DOL issued Field Assistance Bulletin (FAB) 2013-02 in July 2013, which granted a one-time election to delay the next round of 404(a)(5) disclosures to a date no later than 18 months after the date of the initial disclosure. The FAB allowed this one-time transitional election to be exercised for 2014 participant fee disclosures.
This direct final rule is accompanied by a notice of proposed rulemaking. If DOL receives significant adverse comment during the public comment period, it says it will withdraw the direct final rule and address the comments in a subsequent final rule. If not, the direct final rule will become effective on June 17, 2015.
You should consult with your service provider to determine how this final rule will affect the timing of your required participant disclosure.