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  70 West Madison St.
  Suite 1500
  Chicago, Illinois 60602
  (312) 696-1373 




Participant Fee Disclosures: New Compliance Challenges For Retirement Plans

The Department of Labor (DOL) issued a final rule on October 20, 2010 as to the duty of plan administrators to make specific fee and related disclosures to retirement plan participants, beneficiaries, QDRO alternate payees, and eligible employees, including those not currently making elective contributions. These regulations compliment the fee disclosures that plan service providers are required to make to the responsible plan fiduciaries by July 1, 2012 (see here). Both of these requirements have been supplemented with the DOL's May 7, 2012 Field Assistance Bulletin No. 2012-02.

For plan participants, the disclosure rule applies to individual account plans that permit participants to make investment directions. The rule generally does not apply to trustee-directed plan investments, defined benefit plans, non-qualified deferred compensation plans, non-ERISA plans such as church plans, government plans, and certain 403(b) arrangements, as well as SEP IRAs and SIMPLE plans.

Under the DOL's final rule, participants and beneficiaries are required to be provided written disclosure of the plan's investment options, service fees and expenses that are charged to participant accounts, the dollar amount of fees and expenses actually charged to each participant's account for the prior quarter, and the investment performance (including applicable benchmark investment data) and fees of the plan's designated investment alternatives in chart form for easy comparison. The DOL has published model comparative charts in an appendix to the final rule. Although multiple documents can be combined to create the performance and fee comparison chart, separate comparative charts generated by the plan's investment providers may not satisfy this requirement.

The regulations require an initial disclosure to new participants and beneficiaries before they direct any investments, annual fee disclosures, quarterly participant statements, disclosure of changes in plan information or fees at least 30 days in advance of any such change, and upon request, disclosure of specific information (mutual fund prospectuses, financial reports and valuation statements for plan investment options).

For calendar year plans, the initial participant-level disclosure is due by August 30, 2012 and the first quarterly statement must be provided by November 14, 2012, which is the date 45 days following the calendar quarter ending September 30, 2012. Required annual disclosures can be made once during any subsequent 12-month period, so annual disclosures do not have to be made on anniversaries of an initial disclosure. The final rule permits the required disclosure of plan-related information to be included in the plan's summary plan description (SPD) so long as the SPD is furnished at a frequency that comports with the timing rules. Similarly, quarterly disclosures may be included with quarterly benefit statements if the timing rules are satisfied.

The required disclosures fall in two general categories: plan-related information and investment-related information. Plan-related information includes general operational and identification information, administrative expenses and individual expenses. Investment-related information refers to identifying information including the type of investment and an internet Web address for each designated investment alternative, portfolio turnover information, performance data and benchmark comparisons to appropriate broad-based securities indexes as well as fee and expense information. The final rule describes these requirements in greater detail. Special disclosure rules apply to self-directed brokerage accounts, employer stock investments, sample investment portfolios, stable value funds, target date funds, insurance company annuities and "unregistered" investments such as bank collective investment funds.

In addition to the required comparison chart for plan investments, the final rule also requires plans to provide a Web site so participants can have on-line access to information concerning their accounts. As stated in the final rule, plans must provide:

an Internet Web site address that is sufficiently specific to lead participants and beneficiaries to supplemental information regarding the designated investment alternative, including the name of the investment's issuer or provider, the investment's principal strategies and attendant risks, the assets comprising the investment's portfolio, the investment's portfolio turnover, the investment's performance and related fees and expenses.

If the required Web site access is not available through the provider(s) of each investment vehicle offered by the plan, the plan administrator must establish and maintain a Web site that will satisfy the disclosure requirements. Web site investment information must be updated on at least a quarterly basis. Plan sponsors, third party administrators and record keepers may have to undertake systems updates to assure their ability to provide investment data in the required comparison chart format.

Additional disclosure considerations include:

  • Participants must be provided a glossary to cover terminology used in the plan's disclosure documents. Although the DOL does not intend to publish its own sample glossary, it provided web addresses for two sample glossaries of investment terms in its May 7 Field Assistance Bulletin (see and The DOL cautions that plan administrators are still responsible for determining the glossary that is "appropriate for their participants."
  • Fee disclosures include any anticipated expenses for providers in addition to the plan's TPA, record keeper or investment provider. Expenses such as legal and accounting fees will also need to be disclosed if they are paid by the plan and their amount is reasonably predictable.
  • Electronic delivery of the required disclosures is permitted, for now, in accordance with existing rules applicable to electronic delivery of SPDs and the requirements of the interim electronic delivery policy set out in DOL Technical Release 2011-03.
  • Because the required disclosures encompass investment-related information that is required to transfer responsibility for investment results from plan fiduciaries to self-directing participants in accordance with Section 404(c) of ERISA, it may make sense for additional plan sponsors to designate their plans as 404(c) plans. The final rule also eliminates the Section 404(c) requirement that plans automatically distribute mutual fund prospectuses to plan participants.


Subject plans, typically 401(k) plans, will face additional compliance challenges under the participant fee disclosure regulations. Even 404(c) compliant plans may have to expand and modify their investment-related disclosures. Most notably, information on the plan's designated investment alternatives will have to be disclosed on a chart setting out data in a comparative format. Plan sponsors also will have to establish and maintain a Web address to provide participant access to investment information if such access is not available through plan service providers.

Plan administrators (sponsoring employers or individuals designated as plan administrators in the plan document) and their support staff must work with TPAs, record keepers, investment issuers and other service providers to coordinate compliance responsibilities. Service agreements may need to be revised to reflect the allocation of compliance responsibilities and to assure that service providers maintain compliant Web sites.

Action is also required by plan fiduciaries who need to 1) review the fee disclosures from plan service providers that are due by July 1, 2012, 2) determine that the service provider disclosures are complete and comply with the applicable regulations, and 3) document whether or not fees charged to the plan or participant accounts are reasonable in amount. Plan fiduciaries may need additional resources to investigate the reasonableness of provider fees and to evaluate the adequacy of service provider disclosures. We can assist with this process and provide plan fiduciaries independent counsel to assure the protection of the attorney-client privilege that may not apply to communications with counsel to the plan itself.


Andrew S. Williams
Golan Christie Taglia LLP
70 West Madison St.
Suite 1500
Chicago, Illinois 60602
(312) 696-1373


Copyright 2013 Andrew S. Williams. All rights reserved.