News & Resources

DOL Aligns Deadlines for Retirement Plan Fee Disclosures


The U.S. Department of Labor (DOL) issued a final rule on July 13, 2011, under the Employee Retirement Income Security Act (ERISA) to extend and align the applicability dates for its retirement plan fee disclosure rules. The final rule extends by three months the applicability date of the DOL's interim final rule on fee disclosures by plan service providers to plan sponsors/fiduciaries (known as ERISA section 408(b)(2) disclosures), and aligns that regulation with its previously issued final rule on quarterly fee disclosures by plan sponsors to plan participants.


The final rule, published in the July 19, 2011, Federal Register, supersedes the DOL's interim final regulation under ERISA section 408(b)(2), published a year earlier in the July 16, 2010, Federal Register, which requires covered service providers of retirement plans to disclose comprehensive information about their fees and potential conflicts of interest to ERISA-covered plan fiduciaries. The regulation was to become effective with respect to plan contracts or arrangements for services in existence on or after July 16, 2011. The final rule moves the effective date to April 1, 2012.


Aligning Disclosures

The change aligns the section 408(b)(2) service provider disclosure deadline with the DOL's final participant-level disclosure rule, issued on Oct. 20, 2010, requiring that employers disclose information about plan and investment costs to workers who direct their investments in ERISA-covered 401(k) and other individual account retirement plans and that these participant fee disclosure reports be made quarterly and conform to the DOL's model comparative charts. This regulation, which applies to plan years beginning after Oct. 31, 2011, contained a 60-day transition rule that permitted initial compliance no later than 60 days after the beginning of the first plan year after Oct. 31, 2011.


The new final rule retains a modified version of the participant-level disclsoure rule's 60-day transition period that works in conjunction with the effective date of the 408(b)(2) service provider disclosure rule.  


The transitional period under the final participant-level disclosure rule is amended to require that initial disclosures be furnished no later than 60 days after the first day of the plan year beginning after Oct. 31, 2011, or 60 days after the effective date of the 408(b)(b) service provider disclosure rule. In addition, subsequent quarterly participant fee disclosures must be furnished no later than 45 days after the end of the quarter in which the initial disclosures are required to be furnished to participants and beneficiaries.


This means that for a calendar-year plan, the initial particpiant fee disclosures must be provided by May 31, 2012, and subsequent quarterly disclosures must be provided by Aug. 14, 2012 (the 45th day after the end of the calendar quarter of April 1 through June 30, 2012).


This linkage is intended to ensure that the 408(b)(2) service provider disclsoure rule becomes effective first and that all plans will be able to take advantage of the transition period following the effective date of the 408(b)(2) rule. 


A Warranted Delay 

“Although complete transparency and fee disclosure are necessary in the world of corporate retirement plans, this delay is warranted and creates uniformity and logistical sense in the final regulations,” commented Anthony Agbay, president of The Agbay Group and an independent retirement plan consultant. “Prior to this reprieve, plan sponsors could have been required to disclose participant-level fees on quarterly statements before the effective date of regulations granting them full knowledge of the fees at the plan level,” he noted.   


"Employers and workers will benefit from the increased transparency provided by these fee disclosure rules," said DOL Employee Benefits Security Administration (EBSA) Assistant Secretary Phyllis C. Borzi, in a released statement. "Extending and aligning the applicability dates of these related rules gives plan fiduciaries an appropriate amount of time to get all required fee and investment information from their covered service providers so they can then disclose, by the date required, complete and accurate information about retirement plan and investment costs to their workers."


Stephen Miller, CEBS, is an online editor/manager for SHRM.



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