401(k): Greater Flexibility for 401(k) Plan Annual Fee Disclosures!

When is your 2015 Annual Fee Disclosure Due?

In an effort to provide plan sponsors with more flexibility in complying with the many participant notices and disclosures that may apply to a 401(k) plan, the Department of Labor (“DOL”) has again issued guidance on the timing requirement for annual fee disclosures for participant-directed 401(k) plans.  The new guidance on fee disclosures may help you simplify and combine the annual disclosures for your 401(k) Plan by giving you two additional months to comply!

The general rule that has been in place since 2012 provides that an annual fee disclosure of amounts that may be charged to a participant account must be provided to participants (including beneficiaries) on or before the date a participant can first direct investments and at least annually thereafter.  This annual notice is meant to provide participants and beneficiaries with the information they need, on a regular and periodic basis, to make informed decisions about the management of their 401(k) plan accounts and the investment of their retirement savings.

The definition of “annually thereafter” has changed several times as the DOL has considered the practical issues involved in providing the disclosure.  In its most recent guidance, which becomes effective June 17, 2015, the DOL defines “annually thereafter” to mean that annual fee disclosures must be provided at least once in any 14-month period (instead of once in any 12-month period).  In order to take advantage of the flexibility provided by this additional two months, a plan administrator must reasonably determine that using the extended deadline will benefit participants and beneficiaries.

For example:  If the 2014 annual fee disclosure was provided on November 1, 2014, the 401(k) plan has the choice of providing its 2015 annual fee disclosure by November 1, 2015, or if the plan administrator finds that it would be beneficial to participants and beneficiaries to provide the annual fee disclosure later with other participant notices that are being distributed on December 1, 2015, the delayed distribution will comply with the more flexible “14-month” rule.