The issue of whether plan fees are too high, which I write about
regularly, will not go away.
Courts are still considering some of the excessive fee cases
filed in the last few years, but as part of its fee transparency
project, the U.S. Department of Labor has already moved to require
detailed new disclosures to be made: (1) by pension plan service
providers; and (2) by plan administrators to participants in
defined contribution plans, such as most 401(k) plans, that permit
participants to direct investments. The deadlines for those
disclosure requirements were barreling down on service providers
and plan administrators alike. (See our Osler Update for a discussion of the new
Although all of the information provided to hiring fiduciaries
is not required to be passed on to participants, the disclosures
are related because some of the information participants must be
given must come from the service providers. However, the Department
of Labor has announced that it will be issuing some changes to the
service provider disclosure regulations before the end of this
In response to many requests, the Department of Labor has just
extended the compliance deadline for the service provider
regulations to April 1, 2012 (three months later than the January
1, 2012 date proposed earlier), and indicated that it does not
expect that any changes it makes to the rules will require
additional compliance time. The date for initial compliance with the participant disclosure
rules was extended to no earlier than 60 days following the
effective date of the service provider regulations, that is, no
earlier than May 31, 2012.
The first quarterly disclosure will not be due until 45 days
after the end of the quarter in which plans must make initial
disclosures. These changes prevent initial disclosures from being
required before service provider information has been obtained, and
prevent the first quarterly disclosures from becoming due prior to
the initial participant disclosures.
Lead Time is Still Required
While the additional time is welcome, compliance with the new
fee-disclosure rules is a big project requiring advance
consultation and coordination with vendors and other service
providers, as well as changes in software and employee
communications. Non-complying fiduciaries could be liable for
losses caused by their breach, and non-compliant service providers
will owe excise taxes and/or civil penalties. Therefore, the
extended compliance deadlines shouldn't lead plan fiduciaries
or their service providers to put compliance on the back
Carol Buckmann has practised in the employee
benefits field for over 25 years, advising clients on all aspects
of employee benefits and retirement plans, including questions
relating to 401(k), defined benefit and employee stock ownership
plans, welfare plans, fiduciary responsibility, prohibited
transactions and plan asset issues arising in investment fund
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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