Summary of Fee Disclosure Regulations Summary of Fee Disclosure Regulations

Summary of Fee Disclosure Regulations

Summary of Participant Fee Disclosure Regulations
The information plan sponsors are required to disclose to participants pursuant to the participant fee disclosure regulations includes plan-related information and investment-related informationas outlined below:

Plan-Related Information

  • General operational and identification information (initially and annually thereafter)
  • how investment instructions are given
  • restrictions or limitations on investment directions
  • plan provisions regarding voting and similar investment rights
  • identification of investment alternatives and managers
  • description with brokerage windows
  • Administrative expenses information (initially and annually thereafter)
    • explanation of fees and expenses for general plan administrative services, if the expenses can be charged against the plan;
    • quarterly statement that includes:
      • actual charged expenses during the preceding quarter to the participant's account;
      • a description of the services related to the charges; and
    • an explanation of any fees paid for from total operating expenses
  • Individual expenses information (initially and annually thereafter)
    • explanation of fees that may be charged against individual accounts rather than on a plan-wide basis;
    • quarterly statement that includes:
      • the dollar amount of fees actually charged during the preceding calendar quarter;
      • a description of the services related to the charges; and
      • an explanation of any fees paid for from total operating expenses.

Investment-Related Information

  • The plan sponsor must automatically (initially and annually thereafter) provide each participant or beneficiary with the following investment-related information with respect to each designated investment alternative offered under the plan:
    • identifying information of each designated investment alternative and the type or category of the investment
    • performance data and comparisons to benchmarks over one, five and 10 year periods and fee and expense information
    • internet website addresses with issuers objectives, strategies, risks, turnover rates, performance data and fee expenses information provided
    • glossary of terms used
    • annuity options
    • comparative format—the information noted above must be provided in a chart or similar format that facilitates a comparison of such information for each designated investment alternative available under the plan
    • Information to be provided subsequent to investment. The plan sponsor must provide each investing participant or beneficiary with any materials provided to the plan relating to the exercise of voting, tender and similar rights appurtenant to the investment, to the extent that such rights are passed through to the participant or beneficiary under the plan terms.
  • Information to be provided upon request. The following information must be provided to participants and beneficiaries upon request:
    • copies of prospectuses, if applicable;
    • copies of any financial statements or reports;
    • a statement of the value of a share or unit of each designated investment alternative and the date of the valuation; and
    • a list of the assets comprising the portfolio of each designated investment alternative which constitute plan assets and the value of each such asset.
  • a description of the services to be provided to the plan pursuant to the service contract or arrangement between the service provider and the plan;
  • if applicable, a statement that the service provider will provide services pursuant to the contract or arrangement directly to the plan as a fiduciary or as an investment adviser;
  • a description of the compensation the service provider expects to receive in connection with the services provided;
  • if recordkeeping services are provided to the plan, a description of the compensation the service provider expects to receive in connection with such recordkeeping services, and an estimate of the cost to the plan for such services;
  • a description of the manner of how fees will be received by the service provider (for example, will fees be billed or deducted automatically from the plan's account); and
  • an investment disclosure which is an explanation of any compensation charged directly against the amount invested for fiduciary services and recordkeeping and brokerage services (for example, sales percentage fees).

Unless later extended by the Department of Labor (DOL), the regulations require the initial disclosures to be made no later than the later of: 60 days after the beginning of the first plan year after Nov. 1, 2011, or Aug. 30, 2012, which is at least 60 days after the July 1, 2012, delayed effective date of the service provider disclosure regulations.

Summary of Service Provider Disclosure Regulations
As mentioned above, the interim service provider disclosure rules dated July 16, 2010, were the first set of regulations the DOL issued outlining specific disclosure requirements.The information service providers must disclose to plan fiduciaries includes:

  • a description of the services to be provided to the plan pursuant to the service contract or arrangement between the service provider and the plan;
  • if applicable, a statement that the service provider will provide services pursuant to the contract or arrangement directly to the plan as a fiduciary or as an investment adviser;
  • a description of the compensation the service provider expects to receive in connection with the services provided;
  • if recordkeeping services are provided to the plan, a description of the compensation the service provider expects to receive in connection with such recordkeeping services, and an estimate of the cost to the plan for such services;
  • a description of the manner of how fees will be received by the service provider (for example, will fees be billed or deducted automatically from the plan's account); and
  • an investment disclosure which is an explanation of any compensation charged directly against the amount invested for fiduciary services and recordkeeping and brokerage services (for example, sales percentage fees).

The regulations also state that the disclosures must be initially provided reasonably in advance of the date of the contract, but an exact number of days are not specified to allow for flexibility as needed in accordance with the specific facts. There are also additional timeframes provided for any changes that would require additional disclosure after the contract.

For additional information about the disclosure regulations applicable to plan sponsors and service providers and how these disclosure rules impact your business, please contact Melissa Proffitt Reese, Craig Burke, Tiffany Sharpley or any member of the Ice Miller Employee Benefits Group.

Posted: Jan. 26, 2012
Updated: Feb. 17, 2012 (for effective dates only)

 

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.

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