Tuesday, July 22, 2008

DOL Proposed Regulation – Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans

29 CFR Part 2550

RIN 1210-AB07

DOL Proposed Regulation – Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans

The DOL announced proposed regulations to improve disclosure of fees and expenses:

Washington – The U.S. Department of Labor today announced a proposed rule that will make it easier for an estimated 65 million participants covered by 401(k)-type plans to make informed retirement savings decisions. The proposal would provide workers with useful summary information, including fee and expense information, for investment options available under their plans.

"Our proposal is consistent with public consensus that workers need clear and concise information, not dozens of pages of 'legalese,' about the investment options available under their plans, and that they would benefit greatly from having that information in a comparative format," said U.S. Secretary of Labor Elaine L. Chao. "One of the department's top priorities is improved disclosure to workers that will give them the information they need to make informed investment decisions."

The centerpiece of the proposed regulation is a requirement to provide investment-related information in a comparative chart or similar format. As part of the proposal, the department has developed a model chart for complying with this requirement, while giving plan fiduciaries the flexibility to design their own charts or comparative formats. The proposal would also require plan fiduciaries to disclose basic information about the plan and its investment options, such as what options are available under the plan, how to give investment instructions, investment returns and fees and expenses, and how to obtain more detailed information. This information would be given to participants on a regular and periodic basis.

In addition, the department is proposing conforming changes to its regulation under section 404(c) of the Employee Retirement Income Security Act.

"We want to help workers make the most of their 401(k)-type plans by ensuring that they are provided the information they need to make wise investment decisions," said Bradford P. Campbell, assistant secretary for the Labor Department's Employee Benefits Security Administration.

DOL Releases Proposed Fee Disclosure Regulations discusses the proposed regulations:

The DOL states in the regulations that their intention is to establish uniform, basic disclosures for participants and beneficiaries without regard to whether the plan is covered by Code section 404(c). To reach that goal, the DOL has taken a multi-prong approach. Some disclosures are to be made to participants and beneficiaries in the summary plan descriptions (SPDs). Some disclosures are to be made in the quarterly benefit statements which are already required by the Pension Protection Act. And some disclosures are to be made on separate forms. To faciliate disclosure, the DOL has included a model disclosure notice within these regulations.

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