Extension of Applicability and Transition Dates for Plan Sponsor and Plan Participant Disclosure Rules

DOL Tries to Make it Official

Extension of Applicability and Transition Dates for Plan Sponsor and Plan Participant Disclosure Rules


Last week the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) announced its official intention to delay the applicability date of the Plan Sponsor Disclosure rules. However, this is old news. The EBSA made the same announcement in February of this year; see Beacon Alert-“408(b)(2), Plan Sponsor Disclosure Rules-Applicability Date Extended.”  The real kicker in this proposal is the inclusion of Plan Participant Disclosures, an issue the EBSA was mum about in their February announcement, the inclusion of which makes perfect sense.

In 2010, the DOL issued two different disclosure rules:

1.    Plan Sponsor Disclosure rule. This rule was issued in July 2010 as a proposed final regulation. It requires “covered service providers” of ERISA pension plans to disclose specific information relative to that service providers’: services, fiduciary status, and fees, in order to assist the plan fiduciary in determining the reasonableness of the arrangement with that service provider.  See Beacon Alert-“Fee Disclosure Regulation Shines Through.”

2.    Plan Participant Disclosure rule. These were issued as a final rule in October 2010. They are centered around notifying plan participants of fees, expenses and investments relative to their individual account, as well as the plan as a whole.  See Beacon Alert-“Participant Disclosures-Fees, Expenses, Investments and More.”

Both regulations have requirements surrounding fees.  Plan Sponsor Disclosures require that fees charged by “covered service providers” be fully communicated to plan fiduciaries. Plan Participant Disclosure rules, however, require quarterly disclosure of expenses paid from investment alternatives and annual explanation of fees or expenses that may be charged to, or deducted from, individual accounts.  By pushing back the transition period for Plan Participant Disclosures, plan fiduciaries will, in theory, have the information necessary to make the required disclosures to participants per the regulation.

Applicability Dates… if Proposal is Finalized

1.    Plan Sponsor Disclosures. Disclosure requirements will be effective January 1, 2012.

2.    Plan Participant Disclosures. Applicability of the regulation is unchanged; however, the transition period for the initial disclosure has been extended from 60 days to 120 days.  This regulation was effective December 20, 2010 and will become applicable to covered plans for plan years beginning on or after November 1, 2011. Compliance for calendar year plans will be required on January 1, 2012.  Initial disclosures, otherwise required to be disclosed to participants and beneficiaries prior to the direction of their first investment, are subject to a transition period that has now been extended to April 30, 2012 for calendar year plans.

Aligning Plan Sponsor Disclosures and Plan Participant Disclosures makes sense based on the rules’ requirements surrounding the disclosure of fees to plan sponsors and them, in turn, disclosing fee information to participants.  What does not make sense is that we still do not have a final Plan Sponsor Disclosure rule telling us exactly what has to be disclosed and in what format disclosures must be made.  For now, we may at least knowwhen we have to comply with the future final rule.

Post provided by:

Fiduciary Risk Management:  Compliance Services

Sam Henson, JD  l  Jessica Skinner, JD

Securities offered through Lockton Financial Advisors, LLC a registered broker-dealer and member FINRA, SIPC. Investment advisory services offered through Lockton Investment Advisors, LLC, a SEC registered investment advisor. For California, Lockton Financial Advisors, LLC, d.b.a. Lockton Insurance Services, LLC, license number 0G13569.

Nothing in this message should be construed as legal advice. Lockton may not be considered your legal counsel and communications with Lockton’s compliance services group are not privileged under the attorney-client privilege.

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About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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