After more than three years of deliberation, the U.S. Department of Labor has issued comprehensive final regulations that impose substantial new disclosure requirements on administrators of 401(k), 403(b), and other defined contribution retirement plans that allow participant-directed investments.

Given the breadth of the disclosure changes, employers, plan administrators, and fiduciaries should start to consider how they will comply well in advance of the effective date (which, for most plans, will be January 1, 2012). In addition to the new types of disclosures that will be required, most plans will need to accelerate the frequency with which disclosures are made.

The new regulations are effective for plan years beginning on or after November 1, 2011. Calendar-year plans, therefore, will need to comply beginning in 2012. A limited transition rule gives plan administrators up to 60 days after the effective date of the regulations to provide information that is otherwise due to eligible employees on or before the date that they can first direct investments.

With millions of Americans now responsible for the investment of their retirement nest eggs, the DOL wants to ensure that plan participants have the means to understand the options available to them, and receive periodic information about fees and historical investment performance compared against benchmarks.

Some (but not all) of this information is currently disclosed by plan administrators and other plan fiduciaries who take advantage of the limited exemption from fiduciary liability under section 404(c) of ERISA. For the first time, the new regulations make disclosure of detailed plan and investment information an affirmative fiduciary duty of the plan administrator. Highlights of the final regulations include the following:

– Plan administrators must disclose the following information to all eligible employees on or before the date they can first direct investments and annually thereafter:

– General plan information (e.g., how to give investment instructions and a list of current investment options)

– Administrative expense information (e.g., an explanation of plan-wide expenses, such as recordkeeping fees)

– Individual expense information (e.g., an explanation of participant- specific expenses, such as expenses for servicing a plan loan or processing a qualified domestic relations order)

– Investment-related information, including: 

– 1-year, 5-year, and 10-year historical performance data

– appropriate benchmarks for comparison purposes

– fees and expenses (including total operating expenses, expressed as both a percentage and a dollar amount per $1,000 invested)

– direction to an Internet Web site where eligible employees can find supplemental information

– a glossary of investment terms (which may be provided through the Web site)

– A chart that allows eligible employees to compare the investment options under the plan in a simple "apples-to-apples" format. Click here to view a DOL-published model chart with the regulations.

– Plan administrators must disclose to participants, on a quarterly basis, the amount of plan-related fees and expenses actually deducted from their accounts.

The DOL regulations include several special rules addressing the manner in which the disclosure requirements will apply to employer securities, fixed-income investments, and annuity-based investments. Rules relating to target date funds will be published by the DOL at a later date. 

Plan administrators are responsible as fiduciaries for providing the required disclosures. The DOL regulations provide protection to plan administrators with respect to the completeness and accuracy of information provided by a plan’s service provider upon which the administrator reasonably and in good faith relies. Plan administrators will therefore want to address with their service providers (third-party administrators, recordkeepers, fund managers) and amend plan, trust, and provider agreements as necessary, to allocate responsibility for satisfying the various disclosure requirements. Plan administrative committees may need to amend their charters to address the new disclosure duties.

The Employee Benefits and Executive Compensation Group at Ballard Spahr can assist employers, plan administrators, and other plan fiduciaries in designing communication strategies, updating summary plan descriptions (SPDs) and other plan communication materials, and satisfying the new disclosure requirements. Please feel free to contact Brian M. Pinheiro, 215.864.8511 or, or Kurt R. Anderson, 215.864.8432 or

Copyright © 2010 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

Copyright © 2010 by Ballard Spahr LLP.(No claim to original U.S. government material.)