The Department of Labor requires covered service providers to disclose fees and other information to participants in 401(k) and other employee-directed retirement plans. The first quarterly participant fee disclosure was due November 14, 2012, and the penalties for noncompliance are substantial.
What plans are covered?
Any plan subject to Title I of ERISA including:
- Profit sharing
- Money purchase
- Certain 403(b) plans
- Other participant directed plans
Who must make disclosures?
- ERISA fiduciary service provider
- Investment advisors registered under federal or state law
- Record-keepers or brokers
- Providers of accounting, auditing, actuarial, banking, consulting, custodial, insurance, investment advisory, legal, recordkeeping, securities brokerage, third party administration, or valuation services
What must be disclosed?
- General information about the plan and a current list of the plan's investment options
- Fees for record keeping and other administrative costs, along with fees for personalized services
- An explanation of how fees are calculated, who pays them, and how often
- Investment fees
- Historical investment performance
- Benchmark information using an appropriate broad-based securities market index
- Website address for specific additional information
- Glossary of terms
The above information must be disclosed to participants on or before the day they first direct investments and annually going forward.
What are the penalties for noncompliance?
Covered service providers who do not supply quarterly statements within 45 days of the end of each quarter, as well as within 30 days of when an error is found, can face penalties of a 15-100% excise tax and the loss of some or all fees.