DOL Finalizes (and Adjusts) Delay in Fee Disclosure Rules, Clarifies Quarterly Notice Requirement

Yesterday the DOL’s Employee Benefits Security Administration (EBSA) issued a final rule delaying the applicability dates of the new fiduciary and participant fee disclosure rules. This final rule extends the effective date of the new fiduciary-level fee disclosure rules under ERISA Section 408(b)(2) from July 16, 2011 to April 1, 2012 (three months later than the January 1, 2012 applicability date proposed in June). The final rule also aligns the applicability date of the participant-level fee disclosure rules under ERISA Section 404(a) with the fiduciary-level disclosure rule by providing that the initial participant-level disclosure must be furnished no later than the later of (i) 60 days after the effective date of the fiduciary-level disclosures or (ii) 60 days (not 120 days as proposed in June) after the first day of the first plan year beginning on or after November 1, 2011. Thus, for a calendar year plan the initial participant-level disclosures (all disclosures except those to be made quarterly) would need to be provided no later than May 31, 2012 (60 days after fiduciary-level disclosure’s April 1, 2012 effective date).

As for the participant-level quarterly disclosures mandated under the new rules, the final rule clarifies that the plan sponsor must furnish a participant’s or beneficiary’s first quarterly disclosure no later than 45 days after the end of the quarter in which the initial participant-level fee disclosure must be provided. (There had been some uncertainty as to whether the rule as originally proposed might require a quarterly disclosure to be provided before an initial disclosure.) Thus, for a calendar year plan the participant-level quarterly disclosure (a statement of fees and expenses deducted from a participant’s or beneficiary’s account) would need to be provided no later than August 14, 2012 (the 45^th day after the end of the second quarter in which the initial disclosure was provided).

As discussed in a prior post, the interim final rules under Section 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 Section 404(a) require that employers disclose information about plan and investment costs to plan participants and beneficiaries who direct their own investments.

For those of you keeping score, we still do not have a final fiduciary-level disclosure rule. EBSA has stated that it intends to publish the final rule before the end of the year.