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Understanding Retirement Plan Fee Disclosure Requirements

Understanding Retirement Plan Fee Disclosure Requirements

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Fee Disclosure

If you sponsor a retirement plan that is subject to the Employee Retirement Income Security Act (ERISA), stay up-to-date on fee disclosure requirements for covered service providers and plan administrators. Staying informed will ensure that you, your plan participants and their beneficiaries receive required information on a timely basis.

In February 2012, the Department of Labor (DOL) issued these two final regulations requiring that fee disclosures be provided to plan sponsors and participants for retirement plans subject to the Employee Retirement Income Security Act (ERISA).

ERISA 408(b)(2): Retirement Plan-Level Disclosure

As a plan sponsor, you may work with covered service providers (CSPs) if your retirement plan uses a third-party administrator (TPA), recordkeeper, investment advisor or a managed account provider. ERISA requires that most covered service providers (CSPs) disclose information about their services, fiduciary and RIA status, and fees and compensation. The disclosure requirements only kick in if the CSP expects to receive direct or indirect compensation of $1,000 or more.

ERISA 404(a)(5): Retirement Plan Participant-Level Disclosure

If you sponsor a retirement plan subject to ERISA, your plan administrators must provide certain disclosures to participants and, in many cases, to beneficiaries. Governmental plan sponsors aren’t subject to ERISA, but they may voluntarily distribute disclosures to plan participants and beneficiaries.

Fee disclosure distribution should coincide with the first time a plan administrator directs investments, and updates should be sent every year.
Please note: posting a Participant Fee Disclosure document on a website does not constitute delivery.

Plan changes, such as investment option changes, pricing changes or the addition of loan provisions, trigger updated fee disclosure documents. These must be distributed 30-90 days prior to the effective date of the changes. If unforeseeable circumstances prevent a plan sponsor from providing advanced notice, the change notice must be provided as soon as reasonably possible.

Retirement plan administrators may use service providers and investment issuers who provide charts or documents that show designated investment alternatives and facilitate comparisons. These must be distributed to participants and beneficiaries at the same time and in a single mailing or transmission.

For additional information on participant delivery, please review DOL Field Assistance Bulletin 2012-02R.

If you're not sure whether you sponsor a retirement plan that is subject to the Employee Retirement Income Security Act (ERISA), contact a financial professional.

Note:

This information is provided for overview or general educational purposes only. This is not be be considered or intended to be legal or tax advice. Changes in the tax law may affect the information provided. For personalized assistance, including any specific state law requirements, consult a legal or tax advisor.

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