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DOL Participant Disclosure Regulation, What is a Plan Sponsor’s Responsibility?

Participant Disclosure Regulation

 

The Department of Labor’s Participant Disclosure Regulation (“Regulation”) places a heavy administrative burden on retirement plan administrators which is designed to provide extensive information to plan participants in order to help them understand important aspects of managing their accounts. While plan sponsors have generally relied upon record keepers, third party administrators and advisors to provide this service, in many cases the plan sponsor do bear some responsibility.

I set out on my research of this subject by reading the official document in the Code of Federal Regulations (CFR), officially referred to as “29 CFR 2550.404a-5 – Fiduciary requirements for disclosure in participant-directed individual account plans”.  For most plan sponsors, this document is somewhat complex and requires an in-depth knowledge of the Federal Law in relation to ERISA guidelines.

Next, I accessed a white paper offered by Fidelity Investments titled The Participant Disclosure Regulation Ongoing Considerations and Dealing with Change— A Guide for Plan Sponsors.  

What Constitutes Plan-Related Information Under the DOL Participant Disclosure Regulation?

According to Fidelity Investments, the highlights of what constitutes “plan-related information” are as follows:

  • Circumstances under which participants and beneficiaries may give investment instructions.
  • Any limitations or restrictions on the ability to give investment instructions.
  • Plan provisions related to voting, tender, or similar rights.
  • Identification of the plan’s investment options.
  • Identification of any plan-designated investment managers available to manage all or a portion of a participants’ account.
  • A description of any arrangements that allow the selection of investments beyond those designated by the plan, such as “self-directed brokerage accounts” or “brokerage windows.”
  • Plan administrative fees such as accounting, legal, trustee, recordkeeping, and other administrative expenses that are deducted from participant accounts and that are generally allocated on a plan-wide basis.
  • Individual account fees that may be deducted from participant accounts for a service or transaction they select, such as fees for loans, brokerage accounts, or overnight delivery. Keep in mind that individual fees also include shareholder fees deducted from participant accounts, such as short-term redemption fees.

Can a Plan Sponsor Delegate Responsibility of Disclosure Regulation to 3rd Party?

Yes, in general, the DOL Regulation states, “A plan administrator will not be liable for the completeness and accuracy of information used to satisfy these disclosure requirements when the plan administrator reasonably and in good faith relies on information received from or provided by a plan service provider or the issuer of a designated investment alternative.”

However, sponsors still need to be vigilant. Consider that the Fidelity document includes the following language:

As noted above, you are required to provide an explanation of any fees and expenses for plan administrative services (e.g., legal, accounting, recordkeeping) that may be deducted from accounts of participants, as well as fees deducted for an individual service a participant selects. If such fees change, or you wish to deduct a fee from participant accounts that had not previously been deducted, please consider whether the fee was disclosed or if a change notice is required. Please keep in mind that if you direct Fidelity to deduct fees from participants’ accounts, we will process your request in accordance with our standard practices and will presume that you have met any disclosure requirements.

Ok, so even your record keeper cannot provide an absolute safety net for disclosure requirement, what now? I next turned my attention to plan advisory services. The best example of a comprehensive disclosure process checklist I could find was a document provided by advisory firm, Washington Mutual, titled, 404(c) and 404a-5 Checklist.

As a practical matter, the Washington Mutual Checklist has its own disclaimers for not guaranteeing or ensuring compliance with the regulation on its own; however, it is one of the most comprehensive guides I have found.

Timothy Kelly
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Timothy Kelly

Tim Kelly is the Founder of ForexTV. Since its inception in 2003, ForexTV has been a global leader in forex news and has expanded its news coverage to multiple industries. ForexTV is now one of the most recognized brands in global financial news. Mr. Kelly was also the creator and co-founder of 401kTV where he served as Managing Editor until April 2017.

Mr. Kelly is an expert in online marketing, search engine optimization, content development and content distribution. He has consulted some of the top brokerages, media companies and financial exchanges on online marketing and content management including: The New York Board of Trade, Chicago Board Options Exchange, International Business Times, Briefing.com, Bloomberg and Bridge Information Systems and 401kTV.

He continues to be a regular market analyst and writer for ForexTV.com. He holds a Series 3 and Series 34 CFTC registration and formerly was a Commodities Trading Advisor (CTA). Tim is also an expert and specialist in Ichimoku technical analysis. He was also a licensed Property & Casualty; Life, Accident & Health Insurance Producer in New York State.

In addition to writing about the financial markets, Mr. Kelly writes extensively about online marketing and content marketing.

Mr. Kelly attended Boston College where he studied English Literature and Economics, and also attended the University of Siena, Italy where he studied studio art.

Mr. Kelly has been a decades-long community volunteer in his hometown of Long Island where he established the community assistance foundation, Kelly's Heroes. He has also been a coach of Youth Lacrosse for over 10 years. Prior to volunteering in youth sports, Mr. Kelly was involved in the Inner City Scholarship program administered by the Archdiocese of New York.

Before creating ForexTV, Mr, Kelly was Sr. VP Global Marketing for Bridge Information Systems, the world’s second largest financial market data vendor. Prior to Bridge, Mr. Kelly was a team leader of Media at Bloomberg Financial Markets, where he created Bloomberg Personal Magazine with an initial circulation of over 7 million copies monthly.
Timothy Kelly
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