Employers Get More Time to Comply with 401(k) Fee-Disclosure Rule

By Staff Report

Jul. 15, 2011

The U.S. Labor Department said July 13 that it will give employers with 401(k) and other participant-directed individual account plans more time to comply with a rule requiring the disclosure of fees and expenses of investment options offered by the plans.

While the effective date for calendar-year plans remains Jan. 1, 2012, employers will have until May 31, 2012, to disclose fees and expenses to plan participants, the department said. Last month, the department said the information would have to be distributed no later than April 30, 2012.

The extension gives plan sponsors “an appropriate amount of time to get all required fee and investment information from their covered service providers so they can then disclose, by the date required, complete and accurate information about retirement plan and investment costs to their workers,” Phyllis Borzi, assistant secretary at the Labor Department’s Employee Benefits Security Administration, said in a written statement.

“Employers and defined contribution record keepers should be thrilled with this delay as they have all been working very hard to understand the rules, develop the appropriate disclosure notices and think about all the consequences once the information is delivered. The added time and alignment of both disclosure rules will allow sponsors to review the fees associated with their plans and ensure that they are reasonable or make adjustments if necessary,” said Robyn Credico, a senior consultant with Towers Watson & Co. in Arlington, Virginia.

The Labor Department estimates there are 483,000 participant-directed individual account plans, such as 401(k)s.

The centerpiece of the regulations is a requirement that plan sponsors develop and distribute to participants a comparative chart with investment-related information, including fees and expenses.

The first part of the chart will list by category the name of each investment option, such as equity or bond funds; the website for each investment option; the average annual total return for the past year, five years, 10 years and since inception; and rates of return for the comparable time periods for a benchmark index applicable for each investment option with a variable rate of return.

The second part of the chart will list each investment option, its total operating expenses and fees. Examples include annual service charges assessed if the value of investments fall under a certain dollar amount and charges that some funds impose on amounts withdrawn before maturity.

Aside from the chart, employers also must disclose to participants on a quarterly basis the actual dollar amounts charged to their accounts during the preceding quarter for specified administrative expenses.

The Labor Department said the first report with that information must be provided by Aug. 14, 2012, which is 45 days after the end of the second quarter in which the initial disclosure is required. The department previously proposed a May 15, 2012, deadline for the disclosure of the first quarterly statement.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, email


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