New Regulations
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 requirements.)
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 year.
New Deadlines
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 burner.
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 formation.
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