July 13, 2012 3:08:09 pm
The Department of Labor (DOL) released a final rule requiring service providers to disclose fee and expense arrangements to simplify comparisons between investment options. Service providers must give disclosures to participants and beneficiaries on or before the date that they can first direct their investments, and then annually for following years. The disclosures must use a chart or other format designed to provide a comparison of all the plan's investment options.
Some requirement disclosures from the final rule include:
General plan disclosures. This includes an up-to-date list of the plan's investment options and a description of any arrangements that allow a selection of investments beyond those offered.
Plan fees and expenses. Service providers must disclose fees and expenses for legal, accounting and recordkeeping services, plus any other general plan administrative services that may be charged to or withheld from all accounts.
Performance data. Service providers must disclose one-, five- and 10-year returns for investment options, such as mutual funds that don't have fixed rates of return. For investments that have a fixed rate of return, service providers must disclose the investment's annual rate and term.
Benchmark information. For investment options that don't have a fixed rate of return, service providers must disclose the name and returns of an appropriate broad-based securities index over one-, five-, and 10-year periods. Options with fixed rates of return aren't subject to this condition.
Fee and expense information. For investment options that don't have a fixed rate of return, service providers must disclose the total annual operating expenses and any fees or restrictions on a participant's ability to purchase or withdraw from the investment.
Website access. The disclosure must include a website address that provides access to additional information about the investment options.
The final rule's effective date of July 1, 2012, pushed back the participant-level fee disclosure to Aug. 30, 2012, for calendar year plans. This gives providers and responsible plan fiduciaries additional time to provide these initial disclosures to participants or beneficiaries.