News & Publications

Participant Fee Disclosure Deadlines Approach - Are You Ready?

Submitted By Firm: Parker Poe Adams & Bernstein LLP

Contact(s): Keith M. Weddington, L. Elizabeth Gibbes

Author(s):

Date Published: 6/22/2012

Article Type: Legal Update

Share This:

The compliance dates are quickly approaching for the Department of Labor's ("DOL") mandatory participant fee disclosure regulations, which require disclosures (1) by service providers to fiduciaries of qualified retirement plans and (2) by plan administrators of defined contribution plans that permit participant direction of investments to participants and beneficiaries.  

Employer plan sponsors should keep in mind the following deadlines as they prepare to comply with their disclosure obligations:

•    July 1, 2012 - First disclosure of fees by service providers - including employers - to plan fiduciaries. Thereafter, fee disclosure is required reasonably in advance of the date a contract is entered, extended or renewed. This requirement applies to all types of retirement plans, both defined benefit and defined contribution.

•    August 30, 2012 - First annual participant notice of plan investment-related information to participants and beneficiaries. The notice applies for plan years beginning between November 1, 2011 and July 1, 2012. The initial notice for plans with plan years beginning after July 1, 2012 is due 60 days following the first day of the plan's 2012 plan year. Thereafter, notice is required on or before the date a participant is first eligible to direct plan investments and annually.

•    November 14, 2012 - First quarterly disclosure notice to participants and beneficiaries of administrative and individual expenses actually charged to their accounts for calendar year plans and most non-calendar year plans. The ongoing due date is 45 days after the end of each quarter.

Disclosures by Service Providers to Plans

As July 1 approaches, employers sponsoring ERISA retirement plans should begin receiving fee disclosures from their plans' service providers regarding the service provider's direct and indirect compensation. Only those vendors who are paid by the plan, as opposed to the plan sponsor, and who expect to be paid more than $1,000 by the plan are required to make the disclosures. It is important for plan sponsors not to overlook their obligations upon receipt of the service provider disclosures. As plan sponsors begin to receive disclosure information from service providers, each disclosure must be evaluated to determine whether the fee disclosed is "reasonable" for the services being provided. Although ERISA has always prohibited fiduciaries from paying more than reasonable fees for plan services, employers now must formally evaluate those fees. If a fee disclosed is considered unreasonable, the plan sponsor should take action, such as re-negotiating the fee or changing service providers, to ensure compliance with its fiduciary obligations.

Disclosures by Plans to Participants and Beneficiaries

After the evaluation of the fee disclosures from service providers, plan sponsors should begin to prepare to meet their own annual disclosure requirements, which for most plans will be effective August 30, 2012. The required participant disclosures, which are ultimately the responsibility of the plan administrator or its delegate, generally break down into two categories - plan information and investment information.  

Plan information disclosures include: (1) general information regarding investments and fees, including how to designate investments under the plan, a current list of the plan's investment options and a description of "brokerage windows" or similar arrangements allowing a selection of investments beyond those offered by the plan; (2) any upcoming administrative expenses that may be allocated to all participant accounts (e.g., recordkeeping fees, estimated annual legal fees, etc.); and (3) any individual expenses that may be charged to a participant's account (e.g., loan fees, QDRO fees, etc.).  

Investment information disclosures include: (1) historical investment information for those investments that do not provide for a fixed return; (2) fund benchmark information; (3) investment fee and expense information for each fund; (4) a website address where participants can access updated fee information; (5) a glossary of terms; and (6) a comparative chart of investment information with respect to the designated investment alternatives.

If a plan is administered by a third-party administrator or record keeper, the plan sponsor should contact that party to ensure that they will prepare the required disclosures and distribute them to participants and beneficiaries. Plan sponsors should review all annual disclosure materials prior to their distribution.
If the required disclosures will not be prepared by the plan's third-party administrator or record keeper, plan sponsors, with the assistance of third-party vendors and legal counsel, must take the following actions in preparing disclosures to plan participants and beneficiaries in compliance with the regulations:

•    Identify the plan's "designated investment alternatives."

•    Prepare or identify documents that provide the following information:

    o    An explanation of the circumstances under which participants may give investment instructions;

    o    An explanation of any limitations on such instructions, including any restrictions on transfers to and from designated investment alternatives;

    o    A description of voting, tender and similar rights, as well as any restriction on such rights, under an investment in a designated investment alternative;

    o    An identification of any designated investment alternatives offered under the plan or any investment managers; and

    o    A description of any "brokerage windows," "self-directed brokerage accounts," or any other arrangement which allows participants to choose investment options other than those selected by the plan.

•    Prepare an itemization of any upcoming administrative expenses which may be allocated to all participant accounts and include a description of any expenses offset by revenue sharing;

•    Prepare a chart comparing designated investment alternatives over 1, 5- and 10-year periods and identify appropriate benchmarks;

•    Set up (unless already in place) a website address to provide updated investment information;

•    Prepare a description of how any applicable brokerage window operates and any fees or expenses associated with such a brokerage window;

•    Prepare a glossary of terms; and

•    Begin preparing for the quarterly disclosure of actual expenses.

Plan sponsors that take steps now to comply with the regulations and compile the necessary information and data will be better able to troubleshoot any issues that arise during the implementation of these rules.

If you need assistance in preparing participant disclosures or want copies of the Department of Labor's model disclosure charts, which can be used to satisfy the plan disclosure regulations, please call Charlotte Offerdahl or Katie Iams in our Employee Benefits Group at (704) 335-9853 or (704) 335-6640, respectively.

Find an Employment Lawyer

In all 50 U.S. states, every Canadian province, and over 135 countries. View or print a complete ELA member list by clicking here.

Find an Immigration Lawyer

Facilitate employee transfers around the globe. View or print a complete ELA member list by clicking here.

International Background Checks Summaries

Your free resource summarizing the requirements for pre-employment checks around the world.

Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

As an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld
Partner 

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel

Sanmina-SCI

Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.

Starwood

We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel  

Loading...