Effective as of July 2012, retirement plan service providers must provide plan sponsors with a disclosure regarding the compensation they receive for the services provided (i.e., the ERISA 408(b)(2) disclosure). In addition, effective as of August 2012, employers that sponsor retirement plans with participant-directed accounts must disclose detailed investment-related information to participants using a comparative chart format (i.e., the ERISA 404(a)(5) disclosure).
Retirement plan sponsors and service providers are advised to review the timing requirements for these mandatory disclosures and determine whether any information requirements have changed since the original disclosures. This article will review the distribution deadlines for each disclosure and if applicable, any transitional relief provided by the Department of Labor ("DOL").
408(b)(2) Disclosures. The service provider fee disclosure mandate under the DOL's 408(b)(2) regulations became effective on July 1, 2012. Accordingly, covered service providers must have provided such fee disclosures to all existing plan sponsor clients by July 1, 2012. Service providers must provide updated fee disclosures to plan sponsors following a change in fee information as soon as practicable, but in no event later than 60 days after the change.
Barring a change in fee information, service providers need only furnish updated fee disclosures to plan sponsors when the underlying service agreement is extended or renewed. Where a service provider enters into a new service arrangement with a plan sponsor, it must provide the mandatory fee disclosure "reasonably in advance" of the commencement of services.
It should be noted that recordkeepers are subject to additional 408(b)(2) disclosure rules. In addition to providing a 408(b)(2) fee disclosure reasonably in advance of being hired, recordkeepers must also provide fee and expense information concerning the plan's investment options. Instead of the 60-day deadline for providing updated disclosures after a change in fee information occurs, however, recordkeepers need only provide updated disclosures on an annual basis.
404(a)(5) Disclosures. The DOL's 404(a)(5) regulations require plan sponsors to distribute, on an annual basis, a comparative chart to participants that summarizes the plan's investment options as well as provide, on a quarterly basis, certain fee disclosures to participants. Plan sponsors must furnish the comparative charts on an annual basis, meaning at least once in any 12-month period.
Plan sponsors of calendar year plans were required to furnish the first comparative chart by August 30, 2012, and the first quarterly fee disclosure by November 14, 2012. Thus, if the 2012 Comparative Chart was provided to participants in August 2012, the next comparative chart (the "2013 Comparative Chart") need not have been provided until August 2013.
DOL recently issued regulatory relief that affects the timing of plan sponsors' 404(a)(5) disclosures. In Field Assistance Bulletin 2013-02 ("FAB 2013-12"), DOL provided plan sponsors with an additional six-month period for furnishing the 2013 Comparative Chart. Accordingly, a plan sponsor that provided the 2012 Comparative Chart in August 2012 had until February 2014 to provide the 2013 Comparative Chart. Many plan sponsors used this regulatory relief to "reset" the annual timing for the Comparative Chart so as to align its distribution with other participant disclosures and to also allow the 2013 Comparative Chart to reflect performance data for the full 2013 calendar year.
Plan sponsors that, prior to the issuance of FAB 2013-02, had already taken steps or incurred administrative costs to furnish the 2013 Comparative Chart by the original deadline (i.e.,August 2013) were provided a similar six-month grace period for furnishing the next comparative chart (the "2014 Comparative Chart"). While plan sponsors must furnish comparative charts to participants on at least an annual basis, there is no restriction against plan sponsors distributing comparative charts on a more frequent basis.
Re-Cap of Fee Disclosure Deadlines. The 408(b)(2) regulations require covered service providers to furnish disclosures to plan sponsors in the following four instances:
1. when the service provider is first hired,
2. when a service provider has changes or corrections to its previous disclosures,
3. when a service provider's contract or arrangement is extended or renewed, and
4. when the plan's record keeper has updated fee and expense information for the plan's investment options (but only on an annual basis).
With respect to the ERISA 404(a)(5) disclosures, the DOL (pursuant to FAB 2013-02) provided plan sponsors with a one-time additional six-month grace period for furnishing the annual comparative charts so that distribution efforts could be coordinated with other participant disclosures. Indeed, many plans have already availed themselves of this six-month grace period when distributing the 2013 Comparative Chart. Plan sponsors that were in the process of furnishing the 2013 Comparative Chart when FAB 2013-12 was released have the opportunity delay furnishing the 2014 Comparative Chart until as late as February 2015.