On October 20, 2010, the Department of Labor issued final regulations that require private retirement savings plans, such as 401(k)s, to tell employees how much they are being charged in record-keeping, investment management and other fees. The regulations also include rules for disclosing information about the plan’s investment options. These rules apply only to plans where employees are able to choose their own investments. The rules were effective December 20, 2010 and will apply to participant directed individual account plans no later than August 30, 2012 for required disclosures other than quarterly disclosures. Quarterly disclosures must comply with the new rules no later than November 14, 2012.
The regulations are divided into two categories:
Disclosure of plan-related information:
General plan information must be given to the employee on or before the date on which a participant or beneficiary can first direct investments and once a year thereafter. All employees eligible to participate in the plan, whether or not enrolled, must be given the information. General plan information can initially be provided in the Summary Plan Description. Notice of any change to plan-related information must be given at least 30 days, but no more than 90 days, before the effective date of the change. The information to be disclosed includes the following:
Individual plan-related fees actually charged must be disclosed in dollars at least quarterly and may be given as part of the individual benefit statement. The individual plan-related fee disclosures include the following:
Disclosure of investment related information:
Basic investment-related information must be automatically disclosed on or before the date on which a participant or beneficiary can first direct investments and annually thereafter. Some supplemental information must be provided upon request, such as copies of prospectuses or financial reports and lists of assets in the portfolio.
The investment information must be presented in a format for easy comparison among alternatives. The Department of Labor designed a model notice for comparison that is part of the final regulations.
Investment information to be automatically disclosed includes the following:
If the ownership of any investment shares gives the employee the right to vote at shareholder meetings, participants must receive any information about these rights that has been given to the plan.
Investment information to be provided upon request includes copies of prospectuses, financial statements or reports, list of assets in the portfolio, and a statement of the value of a share for each designated investment and the date of valuation.
General plan information can initially be disclosed in the Summary Plan Description. It must be provided on or before the date on which a participant can first direct investments and annually thereafter. Individual fees actually charged to participants must be disclosed in dollars and reported quarterly. They may be provided as part of the individual benefit statement.
The regulation includes a statement that the plan fiduciaries are responsible for prudently selecting and monitoring any record-keeping, investment management, or other firms that provide services to the plan. The plan administrator is responsible for compliance with these disclosure rules.
Read the Pension Rights Center’s comments on the proposed regulations.
Read the Pension Rights Center’s comments in response to the Department of Labor’s 2007 Request for Information on the issue of 401(k) fee disclosure to plans and participants.
Read more about 401(k) fees in our Roadmap to Retirement.< Back