News & Updates
News & Updates
Plan Participant Fee Disclosure FAQ
The Department of Labor (DOL) now requires employers to provide fee and expense information associated with participating in certain retirement plans. The first notice due to participants is an annual notice and provides general information about plan expenses and investment costs. The second required notice is due at least quarterly and includes fees specific to each participant's account. This notice will be provided on the quarterly participant statement beginning with the September 30, 2012 statement.
What is the purpose of these notices?
The notices must disclose all fees and expenses related to retirement plan participation. The purpose behind the DOL's legislation is to provide plan participants with enough data to make informed decisions regarding retirement plan services and investment choices.
Are these fees new?
Retirement plan fees are not new and most participants have been paying fees since they first entered the plan, but they may not have been aware of it. Some fees, although not visible as an expense, affect the long-term value of the account by reducing investment returns. Other fees actually reduce the current value of the account through a withdrawal of funds. The new notices require fees to be communicated in a way that all participants understand the true costs associated with plan participation.
When should I expect the new fee notice?
The first required notice for calendar year plans must be delivered no later than August 30, 2012, and annually thereafter.
For calendar year plans, the second notice is included on your quarterly participant statement and must be furnished no later than November 14, 2012 (i.e. 45 days after the end of the quarter). The quarterly statement only reflects fees and expenses actually deducted from your account during the quarter to which the statement relates.
To which types of retirement plans do the participant-level disclosure rules apply?
These rules generally apply to most retirement plans that allow participants to choose their own investments.
What services am I paying for?
Applicable fees and services may include:
- Investment advisors to assist in selecting and monitoring the plan's investment options
- A recordkeeper to track contributions, earnings, distributions, and so forth
- Custodians to physically hold the assets and distribute funds
- Trustees to hold and/or manage the assets for the benefit of those enrolled in the plan
- Auditors to ensure that plan assets are correctly stated, and plans are compliant with the DOL and Internal Revenue Service regulations
- Legal or tax counsel to assist with resolving legal issues associated with the plan and to document the plan's features
- Investment or mutual fund companies to manage the investments in the plan's fund investment options
- Other professionals to provide education, consulting and reporting services
Will I be notified if my fees increase or decrease?
Yes. The regulations require that fee information is provided to all eligible participants on or before the date on which investments can first be directed and again on an annual basis. If there is a change to the information, a description of such change(s) must be provided to participants at least 30 days, but not more that 90 days, before the effective date of the change(s).
What information will be provided in the annual disclosure notice?
Annual participant fee disclosures will contain:
- General plan-related information, such as investment elections, transfer restrictions, et cetera
- The administrative and individual expenses applicable to the plan
- Information related to investments offered under the plan, including:
- Performance and benchmarking information
- Fee and expense information
- Glossary of investment-related terms
- Available annuity options, if any
What are the requirements for the quarterly disclosure?
The regulations require quarterly disclosure of the actual dollar amount of administrative or individual plan-related fees and expenses charged to or deducted from individual participant accounts, if any. A description of the services for which the charge was made is also required.
What is changing on my statement?
The new quarterly statement will include a new "Fee Deductions" section listing any fees charged to the account during the quarter. The statement will also include some additional fund information that may not have been available on your statement in the past.
Who will receive the disclosures?
The disclosures will be provided to all eligible plan participants and beneficiaries by the Plan Administrator.
Can the disclosures be delivered by electronic media?
Yes, if certain requirements are met.