Mark down May 31, 2012 in your calendar.
That’s the date by which 483,000 U.S. retirement plans must send to their participants the initial disclosures required by new Department of Labor rules under Section 404a5 of ERISA. The disclosures are required of all multi-participant 401(k) plans and ERISA 403(b) plans. DOL estimates that the rule will affect 72 million active participants who hold $3 trillion of plan assets.
Why did DOL adopt 404a5?
DOL believes self-directed plan participants are entitled to the information needed to make “informed decisions” including sufficient information regarding the plan, its expense and investment choices. Even if some of this information is currently available, DOL believes it is not easy for participants to access and understand. Over the 10-year period from 2012-21, DOL estimates that the rule will save participants about $15 billion in fees, in aggregate.
How timely must disclosures be?
The information contained in the annual disclosures must be provided at least once per calendar year. In addition, any changes in the plan’s information must be disclosed at least 30 days (but not more than 90 days) in advance of the effective date of the changes. The first quarterly disclosures must be made 45 days after the end of the quarter for which the initial disclosure is provided, and subsequent quarterly disclosures must be made once per three-month period.
How will disclosures be delivered?
In September of 2011, DOL released an interim policy, creating a safe harbor for plan sponsors that wish to deliver required disclosures electronically over the Internet or via e-mail. It is available here:
Does offering this service make me an ERISA fiduciary?
Not necessarily, but you should consult your company’s compliance guidelines. Separately, DOL is in the process of re-proposing a rule which will clearly define when a provider of investment advice to a retirement plan is considered an ERISA fiduciary. In October of 2011, Phyllis Borzi, a top DOL executive, indicated in published comments that DOL is especially concerned about “the level of protection in the IRA marketplace.” She added that DOL’s re-proposed rule could include new requirements for financial professionals who offer advice on IRA rollovers and transfers, or otherwise help clients make IRA investment decisions. DOL is expected to hold new hearings on the re-proposal in 2012.