The U.S. Department of Labor’s fee disclosure regulations which take effect in 2012 under the Employee Retirement Income Security Act (ERISA) significantly impacts both retirement plan sponsors and service providers. Sponsors of retirement plans will be subject to an extensive set of changes which will require them to be substantially more proactive and diligent in fulfilling their fiduciary responsibilities.
The new regulations, which are designed to improve transparency by requiring service providers and employers to disclose specific information about plan and investment costs, involve two levels of disclosures – a fiduciary level in which service providers must disclose information to plan sponsors, and a participant level in which plan sponsors must disclose information to plan participants. The first of these deadlines goes into effect April 1. Is your company ready?
In this one-hour webinar, moderator Richard Nix joins fellow employee benefits attorneys Bill Freudenrich and Jim Prince to discuss what these new fee disclosure regulations mean for employer-sponsors of plans, help employers strategically prepare for the upcoming spring deadlines, and assist them in avoiding the penalties and liabilities associated with noncompliance.
Topics covered include:
- Which plans are covered by the new regulations
- Deadlines for making fiduciary level and participant disclosures
- Who is responsible for the disclosures
- How to correct a failure to disclose
- Distinguishing between direct and indirect compensation
- Determining who must receive the participant disclosures
- How and when the plan must disclose changes
Watch this webinar | Originally broadcast February 1, 2012
We experienced some audio technical difficulties during the broadcast. We apologize for the inconvenience.
The following are answers to questions asked during the webinar. Please note that these answers are being provided for information of clients and friends of McAfee & Taft and do not provide legal advice and are not intended to create a lawyer-client relationship. In addition, we are not able to provide answers to fact-specific inquiries. Readers should not act upon the information provided below without seeking professional counsel.
Q: Are SIMPLE and SEP plans subject to the fee disclosure requirements?
A: No, SIMPLE and SEP plans are not subject to ERISA.
Q: Is there a minimum plan asset size that exempts a plan from the new fee disclosure requirements?
Q: How would a forfeiture account use of plan funds to cover plan expenses be reported in this new disclosure?
A: Funds held in a forfeiture account are still treated as plan assets. Therefore, if you take money out of a forfeiture account to pay plan expenses, that use of plan assets must be documented and communicated to plan participants on the quarterly report.
Q: Just to clarify, if a plan sponsor pays all the expenses associated with the plan – audit fees, management fees, legal fees, etc. – the new regs do not apply. Is that correct?
A: That is correct. Even in those instances where the plan documents specify that a sponsor maycharge expenses – but then the sponsor chooses not to charge them – the sponsor does not have to disclose the fees because they were not actually incurred by the plan participants.
Q: Suppose a plan participant borrows from his/her 401k account. If we, the plan sponsor, charge a loan fee and the 401k provider charges an administrative fee, does this regulation apply?
A: Yes, if the fees are deducted from the participant’s account.
Q: Can funds in a forfeiture/cash account be used to reduce company matching contributions?
A: If forfeiture funds are used to pay fees to a Covered Service Provider, there has to be a disclosure to plan participants. If forfeitures are used to reduce company matching contributions, there is not a reporting requirement under § 408(b)(2). However, the plan document must allow the use of forfeitures to reduce company matching contributions.