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July 23, 2012

Retirement Plan Fee Disclosures - Are You Ready?

The final fee disclosure regulations issued by the Department of Labor (DOL) require employers to disclose information about retirement plan and investment costs to workers who direct their own investments in ERISA-covered 401(k) plans and other individual account retirement plans. This rule applies to all "participant-directed plans."

The due date to provide the initial annual fee disclosure to participants is fast approaching. A plan sponsor must provide this disclosure to participants no later than August 30, 2012. Failure to provide this information is considered a “prohibited transaction” under the regulation and subject to excise tax.

The August 30 due date includes all plans with plan years starting on or after November 1, 2011 to July 1, 2012. For plan years beginning after July 1, 2012 or later the required disclosure is due no later than 60 days after the plan year begins. For example, for a plan year beginning August 1, 2012 the due date to provide the fiscal year end July 31, 2012 fee disclosure is September 29, 2012.

All plan sponsors of participant-directed plans should have already received the necessary information from their service provider(s) or plan administrator to prepare the annual fee disclosure required under this regulation. For the initial disclosure, the DOL regulations require service providers to supply this information to plan sponsors by July 1, 2012. If you have not yet received this information take action now and contact your service provider(s). Service providers who fail to provide this information will also cause a prohibited transaction and invoke an excise tax obligation.

To assist your service provider(s) and you with this process, the DOL issued a question and answer field assistance bulletin dated May 7, 2012. Other DOL resources include a fact sheet and sample chart of the annual fee disclosure. Access this information along with the regulation on the DOL’s website at www.dol.gov/ebsa. Should you need any assistance with this regulation, contact ORBA to assist you with your needs.