New disclosure rules on retirement plans set for July

New disclosure rules on retirement plans set for July

Companies that sponsor retirement plans for their workers should be aware of new rules set by the Department of Labor (DOL) that will require full disclosure of services and fees associated with retirement plans in effect on or after July 1, 2012. The rules cover defined benefit plans and defined contribution plans including 401(k)s and 403(b)s, but not Simplified Employee Pension (SEP) plans, Savings Incentive Match Plan for Employee (SIMPLE), IRA plans or individual retirement annuities.

The requirement is an effort on the part of DOL to increase transparency and improve understanding among employees of contracts, services, fees and potential conflicts of interest related to retirement plans. Service providers to retirement plans must disclose the full amount of direct and indirect compensation they receive and detail all delivered services (including fiduciary services).

DOL also will require employers who offer self-directed ERISA-covered 401(k) plans to disclose plan and investment-level information including easy-to-understand details about investment options, fees and expenses. Companies will have an additional 60 days to comply with this requirement to review information about retirement plans they receive from their service providers and distribute accurate information to plan participants.

Service providers covered by the new rules include registered investment advisors, third party plan administrators, broker-dealers and record keepers, among others. The new disclosures rules were first proposed by the Department of Labor’s Employee Benefits Security Administration in July 2010, but were delayed to July 2012 to allow service providers time to update systems and information-gathering processes to ensure compliance.