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New Rules Require Retirement Plans to Disclose Investment Fees to Participants


February 8, 2011

By Daniel R. Salemi

The Department of Labor has issued final rules that will require certain retirement plans to disclose plan fee and expense information directly to participants.  Plan sponsors and administrators must comply with the disclosure requirements in these final rules in order to fulfill their fiduciary duties under ERISA.  From a practical perspective, these rules are intended to provide plan participants with a more complete picture of plan fees and expenses, including indirect fees and expenses under a plan’s investment options.

The final rules become effective for plan years that begin on or after November 1, 2011 (January 1, 2012 for calendar year plans).  Plan administrators are required to send the required disclosures to participants within 60 days of the effective date.  For calendar year plans, this means the required disclosures must be sent to participants by March 1, 2012.  

The disclosure requirements generally apply to ERISA-covered plans with participant-directed investments (for example, non-governmental 401(k) plans and ERISA-covered 403(b) plans). 

Under the new rules, plan administrators must disclose the following information in writing to each participant:

  • General plan-related information, including, for example, any restrictions on investment transfers, identification of the plan’s investment managers, and a description of any brokerage window or similar arrangement under which participants can select investments beyond those designated by the plan;
  • General plan administrative expense information, including explanations of any fees that may be charged for general administrative services;
  • Individual plan-related expenses, including explanations of any fees or expenses that may be charged against a participant’s individual account for various services (for example, processing QDROs).  The new rules also require that actual administrative fees charged to each participant’s account be disclosed to the participant on a quarterly basis; and
  • Plan investment fee information, including, for example, identification of each investment option available under the plan, performance data for 1, 5 and 10-year periods for each investment option, benchmark information, and detailed fee and expense information for each investment option.  This information must be disclosed in a chart format that allows participants to make comparisons between the plan’s various investment options.  A model chart is provided in the final rules.

Even though the effective date of these new rules is not until the end of 2011 for most plans, plan sponsors and administrators should begin becoming familiar with the content of the required disclosures.  Complying with the new rules may require plan administrators to collect a significant amount of data that they have not previously received from service providers.  Plan administrators should begin contacting their investment providers and third party administrators.  Finally, plan sponsors should strongly consider a fiduciary review of the compiled data well in advance of actual disclosure to participants.

The text of the final rules may be found here

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