Tuesday, August 13, 2013

Section 404(a)(5) Annual Fee Disclosure Notice Extension

The Department of Labor, in Field Assistance Bulletin ("FAB") No. 2013-02[1] released July 22, 2013, has provided plan sponsors and their service providers with flexibility on when they need to give participants in participant-directed individual account plans (e.g., 401(k) plans) the second annual fee disclosure notice (the "Notice") due under 29 CFR §2550.404a-5 ("§404a-5").

§404a-5 requires plan sponsors to communicate the following information to plan participants and plan beneficiaries:
  • general plan information;
  • investment information including a comparative chart; and
  • fee information. 
The Notice was originally required to be provided no later than 60 days after the effective date of the §408(b)(2) regulations (i.e., July 1, 2012)[2] which meant plan sponsors had until August 30, 2012 to provide the initial Notice to participants.   Thereafter, a Notice was required "at least once in any 12 month period" without regard to whether the plan is a calendar or fiscal year plan.  

Accordingly, with the first anniversary of the initial August 30, 2012 date fast approaching, plan sponsors needed to  determine if, to comply with the "at least once in any 12 month period" requirement, a subsequent Notice was due by August 30, 2013.   

However, thanks to FAB 2013-02, plan sponsors can now provide the second Notice no later than 18 months from the date of the initial Notice.  The extension is meant to allow Plan Sponsors to send the Notice at a time that will benefit participants (e.g., by reducing administrative costs or by providing the information at a more relevant time such as open enrollment) or to align it with other participant notices typically made either just before or just after the beginning of a plan year.  For example, if a plan sponsor who provided the initial Notice on August 25, 2012 believes providing the Notice on a different twelve-month cycle would be more meaningful, it can provide the second Notice no later than February 25, 2014.   

Thereafter, Notices would be due once in the 12 month period measured from the date the second Notice is provided and anniversaries thereof. 

The one-time election to delay the Notice for up to 18 months also applies to a plan sponsor who timely furnished the first Notice and has furnished the second Notice already.  Under the FAB, this plan sponsor could provide its next Notice (the 2014 Notice) no later than 18 months from the date of the second Notice.  This gives everyone the same opportunity for a one-time "re-set" of the timing for their annual Notice. 

If you have any questions on FAB 2013-02, the Notice requirements or your obligations as a plan sponsor or plan administrator, please give us a call at 617-357-5200. 

[1] The full text of the FAB can be found here:  http://www.dol.gov/ebsa/regs/fab2013-2.html.
[2] The DOL amended its §404(a)(5) regulations at 76 Fed. Reg. 42539 (July 19, 2011) to postpone the effective date of the disclosure requirements until at least 60 days after the effective date of the §408(b)(2) regulations.