New DOL Guidance for Participant Fee Disclosure Timing – Sept./Oct. 2015

On March 19, 2015, the Department of Labor (DOL) issued a rule amending the annual timing requirements for the delivery of the participant-level fee disclosures required under the DOL's 404(a)(5) regulations. This new rule allows annual participant fee disclosures to be distributed within 14 months of the prior annual disclosure, instead of within 12 months. The rule is effective for disclosures made on or after June 17, 2015.

Under the DOL's 404(a)(5) regulation, a plan’s administrator must provide periodic fee disclosures to participants in participant-directed individual account plans, to ensure participants have information to make informed decisions about plan expenses and investments. These regulations generally require the fee disclosure to be provided on or before the date a participant can first direct his or her investment, and “at least annually thereafter.” In 2013, the DOL clarified what was considered an annual period by stating the disclosure must be provided no more than exactly one year (e.g., 365 days) after the prior annual disclosure.

The industry voiced concerns about this strict requirement, citing operational and unintentional consequences such as plans holding the annual disclosure until the prior year's disclosure date to ensure they did not 'reset' the timing, resulting in the annual disclosure having to be provided earlier and earlier each year. In response to the industry's concerns, the DOL changed the 12-month requirement to 14 months, essentially creating a two-month grace period.

The intention of this change is to create flexibility. For example, before the changed rule, a plan that previously provided the initial notice on October 15, 2012, would need to provide the annual notice no later than October 15 in subsequent years. With this changed rule, the plan would be required to provide the annual notice no later than December 15.

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