DOL Officially Proposes Delay in Application of Fiduciary Fee Disclosure Rules
The DOL's Employee Benefits Security Administration (EBSA) has finally provided official notice of its proposal to delay the applicability date of the new fiduciary fee disclosure rules under ERISA Section 408(b)(2), from July 16, 2011 to January 1, 2012. Although EBSA announced its intention to propose this delay back in February, this week's proposal, once finalized, will make the delay official.
EBSA's February announcement was mum as to whether the agency would also delay the new participant-level disclosure rules under ERISA Section 404(a), scheduled to take effect for the first plan year beginning on or after November 1, 2011, but we speculated delay of the 408(b)(2) rules might lead to a delay in the application of the participant-level disclosure rules. This week's EBSA notice made clear that the DOL will not delay the effective date of the participant-level disclosure regulation, but it will extend the date by which the initial disclosures must actually be provided – instead of the 60 day timeframe provided under the final rules, a plan would have 120 days to furnish the initial disclosure. Thus, a calendar year plan would have to furnish initial participant disclosures no later than April 30, 2012.
This week's notice also made clear that, contrary to the wishes of many plan sponsors and service providers, we should not expect further delay of either the 408(b)(2) regulation or the participant-level disclosure regulation. This should not be terribly problematic for plan sponsors, however, because most large service providers have already configured their systems and prepared materials to comply with the new regulations.
As discussed in a prior post, the interim final rules under 408(b)(2) require certain pension plan service providers to disclose information to assist plan fiduciaries in understanding the reasonableness of the fees being charged for plan services and in assessing potential conflicts of interest that might affect the quality of those services. The final participant-level disclosure rules under 404(a) require that employers disclose information about plan and investment costs to plan participants who direct their own investments.
This week's official proposal to delay application of the 408(b)(2) rules and to extend the date by which initial participant disclosures must be provided is welcome news for both plan fiduciaries and service providers, who have generally been operating under the assumption that the regulations would be delayed as EBSA suggested in February. Comments on the proposal to formally extend the effective date of the 408(b)(2) regulation and on the transitional rule for the application of the participant-level disclosure regulation are due by June 15, 2011.