New Pension Plan Fee and General Disclosure Requirements

Accounting & Auditing

Date:

11/12/2010

The Department of Labor’s Employee Benefits Security Administration released a final rule that requires plan administrators to furnish to participants additional information on the plan and plan investments. The rule in general states that plan fiduciaries must act prudently and solely in the interest of the plan’s participants and beneficiaries. This includes acting as a fiduciary related to the investment of plan assets. For participant directed investments this rule requires the plan administrator take certain steps to ensure that participants and beneficiaries are informed regularly so that they can make informed decisions with regard to the management of their participant accounts.

This rule is effective for plan years beginning on or after November 1, 2011. For calendar year plans, compliance will be required on January 1, 2012. The complete fact sheet can be accessed at http://www.dol.gov/ebsa/newsroom/fsparticipantfeerule.html. Furthermore, the plan administrator must provide to each participant or beneficiary certain plan-related information and certain investment-related information. These categories of information are described below:

Plan-Related Information

General plan information about the structure and mechanics of the plan, such as an explanation of how to give investment instructions under the plan, a current list of the plan's investment options, and a description of any "brokerage windows" or similar arrangement that enables the selection of investments beyond those designated by the plan.

An explanation of any fees and expenses for general plan administrative services that may be charged to or deducted from all individual accounts. Examples include fees and expenses for legal, accounting, and recordkeeping services.

An explanation of any fees and expenses that may be charged to or deducted from the individual account of a specific participant or beneficiary based on the actions taken by that person. Examples include fees and expenses for plan loans and for processing qualified domestic relations orders.

Investment-Related Information

Participants must be provided specific information about historical investment performance. 1, 5 and 10-year returns must be provided for investment options, such as mutual funds, that do not have fixed rates of return. For investment options that have a fixed or stated rate of return, the annual rate of return and the term of the investment must be disclosed.

For investment options that do not have a fixed rate of return:

The name and returns of an appropriate broad-based securities market index over 1-, 5-, and 10-year periods (matching the Performance Data periods) must be provided. Investment options with fixed rates of return are not subject to this requirement.
Total annual operating expenses expressed as both a percentage of assets and as a dollar amount for each $1,000 invested, and any shareholder-type fees or restrictions on the participant's ability to purchase or withdraw from the investment.

For investment options that have a fixed rate of return, any shareholder-type fees or restrictions on the participant's ability to purchase or withdraw from the investment.

In addition to the plan-related information that must be furnished up front and annually, participants must receive statements, at least quarterly, showing the dollar amount of the plan-related fees and expenses (whether "administrative" or "individual") actually charged to or deducted from their individual accounts, along with a description of the services for which the charge or deduction was made. These specific disclosures may be included in quarterly benefit statements required under section 105 of ERISA. We have included a Sample Model Comparative Chart that can be used to satisfy the above requirements.

If you have any questions regarding participant or plan-related information, please feel free to contact our 401(k) and Benefits Plan professional, Mary Eileen Vitale, at vitale@hwco.com, or Anthony LaNasa at lanasa@hwco.com.

New Pension Plan Fee and General Disclosure Requirements

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