DOL Clarifies Effective Dates for Fee Disclosure Rules

June 6, 2011

As reported in prior WorkCite articles, two significant new requirements affecting retirement plan fiduciaries, plan administrators and service providers are scheduled to take effect soon. First, certain providers of services to an ERISA-covered retirement plan must furnish disclosures to the plan’s fiduciaries regarding the compensation that they or their affiliates receive in connection with providing those services (referred to as “covered service providers”), see “An Overview for Plan Sponsors and Fiduciaries of the New Requirements for Service Provider Arrangements.” Second, plan administrators of ERISA-covered defined contribution retirement plans that permit participant investment direction must furnish to plan participants information concerning fees and expenses associated with their plan accounts and the plan’s investment options, see “Plan Administrators Should Prepare Now to Comply with New Participant Disclosure Requirements.”

The U.S. Department of Labor (DOL) has recently clarified the dates on which these requirements will take effect to better align the two sets of rules and provide sufficient time for affected parties to comply.

Service Provider Fee Disclosures

Covered service providers must comply with the fee disclosure rules by January 1, 2012. As originally adopted, the rules were to take effect on July 16, 2011. Consequently, covered service providers must deliver to plan fiduciaries the necessary fee disclosures by the end of this year. Plan fiduciaries will then be required to review and consider the sufficiency of those disclosures. The fee disclosure rules apply to both new and pre-existing service provider arrangements and contracts.

Participant-Level Fee Disclosures

The participant-level fee disclosure regulations are effective for plan years beginning on or after November 1, 2011. The rules originally provided a 60-day transition period during which plan administrators could deliver to exiting participants and other eligible employees the initial disclosure notice required under the rules. The DOL has expanded the transition period to 120 days and clarified that notices can be provided during the transition period to both currently eligible participants and those who first become eligible during the transition period. For calendar year plans, the practical impact of this action is as follows:

  • All individuals who (1) are eligible to participate or are participating in the plan on January 1, 2012 or (2) who first become eligible to participate during the period from January 1, 2012 to April 30, 2012 must receive the initial disclosure notice by no later than April 30, 2012.
  • After April 30, 2012, the normal timing requirements apply. Consequently, individuals who first become eligible to participate in the plan after April 30 must receive an initial disclosure notice on or before their date of initial eligibility for the plan.

It appears unlikely that the DOL will extend these effective dates any further. Consequently, covered service providers, plan fiduciaries and plan administrators should take active steps to familiarize themselves with these rules and be prepared to meet the newly announced compliance deadlines.

McGuireWoods Employee Benefits & Executive Compensation Group

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