The BNA Tax and Accounting Center is the only planning resource to offer expert analysis and practice tools from the world's leading tax and accounting authorities along with the rest of the tax...
By Andrew L. Oringer and Susan M. Camillo
Dechert LLP, New York, NY and Boston, MA, respectively
The United States Department of Labor (the "DOL") announced on March 18, 2015, a "direct" final rule (the "Final Rule") extending the time in which annual disclosures must be provided by fiduciaries of participant-directed individual account plans to its participants and beneficiaries by two months to disclose certain plan and investment-related information.
Under the 2010 DOL regulation governing participant-level disclosure1, fiduciaries of participant-directed individual account plans, such as 401(k) plans, are required to provide, among other things, disclosure relating to plan fees and investment options "at least annually," for each 12-month period, after a participant could first direct investments.2 The DOL, in Field Assistance Bulletin 2013-02 ("FAB 2013-02"), subsequently made it clear that the disclosure must be given at least once in any 12-month period, without regard to whether a plan operates on a calendar- or fiscal-year basis.
At the same time, the DOL recognized the concern that such a rigid disclosure requirement may impose undue administrative burdens on plan fiduciaries. The DOL in FAB 2013-02 solicited comments on whether more flexibility was needed in respect to the annual disclosures.
In response to comments advocating for added flexibility, the DOL has now revised the definition to require annual disclosures "at least once in any 14-month period" rather than any 12-month period. According to the DOL, this revision "achieves the correct balance by ensuring that participants and beneficiaries will receive annual disclosures on a consistent and regular basis, and without unwarranted delays in-between disclosures, while at the same time offering plan administrators some flexibility."
The Final Rule will become effective on June 17, 2015, unless significant adverse comments are submitted by April 20, 2015. However, the DOL stated in the Final Rule that, for the period during which this rule change is being considered, it will as an enforcement matter treat a plan administrator as satisfying the timing requirement for annual disclosures if the necessary disclosure is made within the new two-month grace period, provided that the administrator reasonably determines that doing so will benefit participants and beneficiaries. Therefore, plan fiduciaries preparing for 2015 disclosures prior to the effective date will satisfy the Final Rule if the disclosures comply with the new 14-month requirement (provided that the fiduciaries reasonably determine that doing so will benefit participants and beneficiaries). The temporary enforcement policy would expire upon the effective date of the Final Rule.
If you have any questions about the Final Rule or participant-level disclosure generally, please contact one of the Dechert attorneys listed above or any Dechert attorney with whom you regularly work.
Thank you to Aaron S. Cha for his assistance with this publication.
For more information, in the Tax Management Portfolios, see Kushner, 361 T.M., Reporting and Disclosure Under ERISA, Horahan and Hennessy, 365 T.M., ERISA — Fiduciary Responsibility and Prohibited Transactions, and in Tax Practice Series, see ¶5530, Fiduciary Duties and Prohibited Transactions, ¶5570, Reporting and Disclosure Requirements for Benefit Plans.
Copyright©2015 by The Bureau of National Affairs, Inc.
2 29 C.F.R. §2550.404a-5(h)(1). For a general discussion of the 2010 DOL regulation, please see our previous OnPoint, DOL Issues Final Regulation on Participant-Directed Individual Account Plan Disclosure Obligations
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)