| The service provider and the participant fee disclosure regulations will have more impact on retirement plans than any other guidance the DOL has issued in the last couple of decades. The two sets of regulations place considerable responsibility and new burdens on service providers and plans. As financial institutions and plan administrators continue to prepare for the regulations, the unavoidable question is when must we commence complying with the regulations. This technical update discusses the effective dates of the respective regulations and the possibility of delay.
At this point, what is the effective date of the service provider fee disclosure (408(b)(2)) regulations?
April 1, 2012.
What actions must take place by the effective date?
• Covered service providers must provide initial disclosures on or before April 1, 2012, and
• Covered service providers must provide initial disclosures with regard to an arrangement with a covered plan entered into, extended, or renewed after April 1, 2012 within a reasonable time prior to entering into, extending, or renewing the arrangement.
Since the service provider fee disclosure regulations are interim final regulations and not final regulations, is effective date contingent on the regulations being finalized?
No. In fact, although the service provider fee disclosure regulations are interim final regulations, the regulation extending the effective date to April 1, 2012 is a final regulation. The word “interim" merely indicates that the DOL is still working on them. From the perspective of plan sponsors and service providers, the regulations have the same effect as if they were final.
Is the DOL considering extending the April 1, 2012, deadline for the service provider fee disclosure regulations?
The DOL has made no official statements indicating that it intends to extend the deadline. However, since the DOL has yet to issue final service provider regulations, several organizations (SPARK, ASPPA) have requested an extension to the deadline. Of course, any delay in the service provider fee disclosure regulations will delay the initial disclosures under the participant fee disclosure regulations, because the first participant fee disclosures are not due until 60 days after the effective date of the service provider rules.
What changes do we anticipate will be in the final regulations?
In various discussions with the DOL, the only change discussed is the addition of a one or two page summary of the disclosures with a roadmap describing where the plan fiduciary could locate detailed explanation of the disclosures. See Preamble to DOL Reg. §2550.408b-2(c). Accordingly, practitioners and plan administrators should utilize the interim regulations in preparing for compliance with the regulations.
What is the effective date of the participant fee disclosure (404(a)) regulations?
The participant fee disclosure regulations apply for plan years beginning after October 31, 2011. However, the deadline for the plan administrator of a covered plan to provide the initial annual plan, expense, or investment disclosures to participants is now 60 days after the later of:
1. The effective date of the 408(b)(2) regulations (i.e., April 1, 2012), or
2. The date the regulations apply (i.e., plan years beginning after October 31, 2011).
For calendar year plans, that means the deadline is May 31, assuming the DOL does not extend the service provider deadline. The deadline to provide the first quarterly expense disclosure under the participant fee disclosure regulations is the 45th day of the quarter following the quarter in which the plan must provide the initial disclosures.
Is the DOL considering changes to the participant fee disclosure regulations?
No. The participant fee disclosure regulations are final and the DOL is not considering any changes to the regulations. However, there are several areas that are “reserved" within those regulations, where we may expect to see future guidance, such as the currently proposed regulations on target date funds.
Free Web Seminar
For those who attend our Practical Guide to Plan Fee Disclosures Workshop in January and February (see below), we will provide access (at no charge) to the recording of our Web seminar covering the final service provider fee disclosure regulations. Shortly after the final regulations are issued, we will e-mail attendees with instructions regarding how you can access the recorded presentation. The classroom Workshop, along with the recorded Web seminar presentation, should help provide attendees with the necessary tools to comply with the regulations.
Practical Guide to Plan Fee Disclosures Workshop – January/February 2012. Are you ready to implement these rules in the next few months? Most practitioners would say – “no." That is where we can help. Using forms, case studies and examples, this workshop will provide you with the necessary tools and guidance to answer the tough questions and show you how to implement the regulations. For more details and to register online, visit our Web site.
Orlando Advanced Pension Conference – Register by January 17 and Save $150. Loews Royal Pacific Resort at Universal Orlando® – February 15-17, 2012 – Earn up to 19 hours of CE credits. See the complete list of topics and register online on our Web site.
Just for ERPAs Workshop – February 14, 2012, Orlando, FL – Earn up to 8 hours of ERPA credit, including 2 ethics hours. Early bird discount ends on January 17. See event agenda and register online on our Web site.
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