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.

Related Links:

• News Release
• DOL Proposed Regulation – Proposed Fee & Expense Disclosure Regulation [HTML]
• DOL Proposed Regulation – Proposed Fee & Expense Disclosure Regulation [PDF]
• Model Comparative Chart
• Fact Sheet

• Death to the Prospectus Requirement! The New 401(k) Participant Disclosures Rules
• Observations on DOL's Proposed Regulations Governing Disclosure Requirements for Participant-Directed Individual Account Plans
• Labor Department Proposes Dollar-Based 401(k) Fee Disclosure
• U.S. Pushes for Clearer Disclosure of 401(k) Fees
• EBSA Finishes Regulatory Package with Participant Disclosure Proposal
• Another Piece of the Extended Puzzle - Proposed DOL Regulations Reach to General Prudence Rules
• DOL Releases Proposed Fee Disclosure Regulations
• 401(k) proposal would clarify fees

Agenda and Testimony Requests and Outlines for Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure

The DOL has posted the Agenda and Testimony Requests and Outlines for the Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure, which was rescheduled to March 31 and April 1.

DOL Proposed Regulation – Model Notice of Multiemployer Plan in Critical Status

29 CFR Part 2540

RIN 1210-AB26

DOL Proposed Regulation – Model Notice of Multiemployer Plan in Critical Status

The DOL issued a model notice for multiemployer plans in critical status:

Washington – The U.S. Department of Labor today announced a proposed regulation providing a model notice for use by multiemployer defined benefit pension plans to notify plan participants and others that their plan is in critical funding status. The proposed regulation is the result of the Pension Protection Act of 2006 (PPA) signed into law by President George W. Bush on August 17, 2006.

The PPA amended the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code to require that sponsors of multiemployer defined benefit pension plans in critical status for a plan year provide notice of this status to participants, beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corp. (PBGC) and the Department of Labor. PBGC, created under ERISA to insure defined benefit pension plans, guarantees payment of basic pension benefits of affected workers and retirees.

The notice must inform participants that their plan is in critical status and of the possibility that adjustable benefits may be reduced or even eliminated. The proposed regulation contains a model notice that may be used by plans to satisfy the notice requirement.

The public may submit comments to the Labor Department at e-ORI@dol.gov or through the federal e-rulemaking portal at www.regulations.gov. Paper-based comments should be sent to the Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210, Attention: Notice of Critical Status. The proposed regulation is to be published in the March 25 edition of the Federal Register.

Related Links:

• News Release
• DOL Proposed Regulation – Model Notice of Multiemployer Plan in Critical Status [HTML]
• DOL Proposed Regulation – Model Notice of Multiemployer Plan in Critical Status [PDF]
• Model Notice

• New Multiemployer Pension Plan Funding Rules Begin Impacting Employers in April 2008
• End of First Quarter Triggers Issuance of Multiemployer Pension Plan Notices Pursuant to the Pension Protection Act
• Benefit Cutbacks in Multiemployer Plans
• How Well-Funded is Your Pension Plan?
• Benefit Cutbacks in Single Employer Plans
• EBSA issues model notice for multiemployer plans in critical status
• New Multiemployer Plan Disclosure Requirements - ERISA Section 101(k)
• New Multiemployer Plan Disclosures and Communications Required by Pension Protection Act of 2006

DOL Notice - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure

The DOL announced the rescheduling of the Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure to March 31 and April 1.

Washington — The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) has re-scheduled its public hearing to March 31, and April 1 (if necessary), to hear testimony about its regulatory proposal on the disclosure of service provider compensation and conflicts of interest information to employers. The hearing will take place at the Labor Department in Room S-4215 A-C, 200 Constitution Avenue, NW in Washington, DC.

Persons wishing to testify at the hearing should submit an outline of topics to be discussed by March 20, 2008 online to e-ORI@dol.gov. Persons who submitted a request to testify on the earlier date are not required to make another submission, unless they will be unable to testify on March 31. Information on the hearing agenda will be posted on the EBSA's Web site at www.dol.gov/ebsa.

Related Links:

• News Release
• DOL Notice - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure (March 11, 2008) [HTML]
• DOL Notice - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure (March 11, 2008) [PDF]

DOL Proposed Regulation – Amendment of Regulation Relating to Definition of ‘‘Plan Assets’’ Participant Contributions

29 CFR Part 2510

RIN 1210–AB02

DOL Proposed Regulation – Amendment of Regulation Relating to Definition of ''Plan Assets'' Participant Contributions

• Who would this affect? This would affect the “sponsors and fiduciaries of contributory group welfare and pension plans covered by ERISA, including 401(k) plans, as well as the participants and beneficiaries covered by such plans and recordkeepers, and other service providers to such plans.”
• Who is eligible for the safe harbor? All small employee benefit plans, defined as participants with fewer than 100 participants at the beginning of the plan year, are eligible. The large plan/small plan designation and 80-120 participant rule for IRS Form 5500 filing purposes does not apply.
• What is the safe harbor? The safe harbor will consider deposits made within the 7-business day period as if they were made on “the earliest date on which such contributions can reasonably be segregated from the employer's general assets.”
• Are loan repayments included? This proposed regulation would also apply to loan repayments (“amounts paid by a participant or beneficiary or withheld by an employer from a participant's wages for purposes of repaying a participant's loan (regardless of plan size)”). This is a change position from DOL Advisory Opinion 2002-02A (May 17, 2002).
• When is the safe harbor effective? The DOL "will not assert a violation of ERISA" if a plan satisfies the requirements before the effective date.
• What if plan deposits are considered late? There would be a prohibited transaction, as the plan funds would be commingled with employer funds. The plan would be required to be made whole, including the lost earnings. IRS Form 5330 would be required to be filed and an excise tax would be paid. Appropriate disclosures would be required to be made on IRS Form 5500. When are comments due? They are due on or before April 29, 2008.

The DOL announced a proposed regulation providing a safe harbor rule for employee contributions to small plans:

Washington – The U.S. Department of Labor today announced a proposed rule to provide greater protection for employee contributions deposited to pension and welfare benefit plans with fewer than 100 participants by proposing a safe harbor period of seven business days following receipt or withholding by employers.

"Our proposal will protect workers by encouraging employers to deposit participant contributions to small pension and welfare plans in a timely manner," said Assistant Secretary of Labor for the Employee Benefits Security Administration Bradford P. Campbell. "It also will provide employers with a higher degree of compliance certainty."

Under the, employers of all sizes current rules must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15^th business day of the month following the month in which contributions are received or withheld by the employer. The latest date for forwarding participant contributions to health plans is 90 days from the date on which such amounts are received or withheld by the employer.

The proposed rule would amend the participant contribution rules by creating a safe harbor period under which participant contributions to a small plan will be deemed to be made in compliance with the law if those amounts are deposited with the plan within seven business days of receipt or withholding.

Before the effective date of the final regulation, the department will not assert a violation of the Employee Retirement Income Security Act regarding participant contributions where such contributions are deposited with small plans within the seven business day safe harbor period.

In addition, the department requests information and data regarding a possible safe harbor for plans with 100 or more participants to enable it to evaluate the current contribution practices of these large employers.

The public may submit comments on the proposed rule electronically through www.regulations.gov or via e-mail to e-ORI@dol.gov. Comments on paper should be sent to the Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, 200 Constitution Avenue, N.W., Washington, D.C. 20210, Attention: Participant Contribution Regulation Safe Harbor. The proposal is to be published in the February 29 edition of the Federal Register.

Contribution Timing and Collection Responsibility, a Q&A

1. What are the current Department of Labor (DOL) rules regarding an employer depositing employee 401k deferrals?
2. I heard there is some sort of 15-day rule. What's this about?
3. What is the DOL trying to accomplish now?
4. What will be the rule going forward?
5. You said it is "not the rule yet." What does that mean?
6. Was there anything else in this proposed amendment besides the timing of employee contributions?
7. What about plans that have more than 100 participants-does this safe harbor apply to them?
8. Is there an economic benefit to this proposed seven business-day safe harbor?
9. What's happening with collection responsibility?
10. When are contributions late?
11. What does it mean when contributions are late?
12. What must a plan sponsor do to fulfill its responsibility?
13. What if the fiduciary has not assigned responsibility?
14. What about plans such as a SIMPLE IRA or SEP IRA that have no trustee?
15. What happens when one trustee, who has no direct responsibility for collecting contributions, knows that contributions are delinquent?
16. So what's the bottom line?

Related Links:

• News Release
• DOL Proposed Regulation – Amendment of Regulation Relating to Definition of ‘‘Plan Assets’’ Participant Contributions [HTML]
• DOL Proposed Regulation – Amendment of Regulation Relating to Definition of ‘‘Plan Assets’’ Participant Contributions [PDF]
• Labor Regulation 2510.3-102 Definition of “plan assets”—participant contributions

• Fiduciary Convicted of Filing False IRS Form 5500
• Delinquent Contributions and a 7-Business Day Safe Harbor

• U.S. Department Of Labor Proposes A Safe Harbor For Deposits To Small Plans
• Contribution Timing and Collection Responsibility, a Q&A
• Department of Labor Issues Guidance on Compliance for Wellness Programs and Safe Harbor for Deposit of Employee Contributions
• ASPPA: Comments on Proposed Regulations Relating to Definition of “Plan Assets” – Participant Contributions
• American Benefits Council/ICI: Participant Contribution Regulation Safe Harbor
• DOL Proposes Safe Harbor for Deposit of Small Plan Contributions and Clarification for All Plans
• Participant Contributions Are 'Plan Assets' After 7 Business Days
• Deferral Deposit Deadline
• TCRS 2008-01: Department Of Labor Proposed Amendment To Plan Asset Regulation
• Department of Labor Proposes “7-Business Day Safe Harbor” for Depositing Contributions to Small ERISA Plans
• Proposed regs would provide 7-day safe harbor for contributions to small plans
• Are Participant Contributions Remitted Quickly Enough? Proposed Safe Harbor for Small Plans and Implications for Large Plans
• 7-day Safe Harbor for Depositing Participant Contributions
• DOL’s Proposed 7-Day Safe Harbor for Employee Contributions May Affect FAB 2008-01
• Legal Alert: DOL Proposes Small Plan Safe Harbor for Remitting Participant Contributions to Plan
• A Potentially Dangerous 'Safe Harbor'
• Department of Labor proposes safe harbor rule for deposit of employee 401(k) contributions...finally
• EBSA Proposes Seven-Day Employee Contrib Safe Harbor

DOL Proposed Regulation - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure

29 CFR Part 2550

DOL Proposed Regulation - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure

The DOL announced plans to hold a hearing on DOL Proposed Regulation - Reasonable Contract or Arrangement Under Section 408(b)(2)--Fee Disclosure:

Washington — The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) will hold a public hearing March 20-21, to hear testimony about its regulatory proposal on the disclosure of service provider compensation and conflicts of interest information to employers. The hearing will take place at the department in Room S-4215 A-C, 200 Constitution Avenue, NW in Washington, DC.

The proposal, published in the December 13, 2007 Federal Register, would amend the department's regulation dealing with the provision of services to employee benefit plans. Specifically, the proposed regulation provides that contracts between plans and certain service providers must include detailed written disclosures about direct and indirect compensation that will be received by the service provider and conflicts of interest. The department also published a proposed class exemption to provide relief for employers when service providers fail to comply with the regulation's disclosure requirements.

In view of the importance of these proposals to workers and plans, the department decided to hold a public hearing. Persons wishing to testify at the hearing should submit an outline of topics to be discussed by March 10, 2008 online to e-ORI@dol.gov. Information on the hearing agenda will be posted on the EBSA's Web site at www.dol.gov/ebsa.

Related Links:

• News Release
• Agenda
  Testimony Requests and Outlines
• DOL Proposed Regulation - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure (February 27, 2008) [HTML]
• DOL Proposed Regulation - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure (February 27, 2008) [PDF]
• DOL Proposed Regulation - Reasonable Contract or Arrangement Under Section 408(b)(2)--Fee Disclosure
• DOL Notice - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure
• Agenda and Testimony Requests and Outlines for Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure
  
• DOL hearing on proposed 401(k) fee disclosure regs likely to be contentious
• EBSA to Hold Hearing on Service Provider Compensation and Plan Fee Disclosure
• Benefits Groups Call for Certain Changes in EBSA's Proposed Regs on 401(k) Plan Fee Disclosure
• Changes Proposed for Pension Regulations

DOL Proposed Regulation – Civil Penalties Under ERISA Section 502(c)(4)

29 CFR Part 2560

RIN 1210-AB24

DOL Proposed Regulation – Civil Penalties Under ERISA Section 502(c)(4)

The DOL announced a proposed regulation for "assessing civil penalties against plan administrators who fail to disclose certain documents to participants, beneficiaries and others as required by the Employee Retirement Income Security Act, as amended by the Pension Protection Act (PPA)":

"The PPA established new disclosure provisions relating to: funding-based limits on benefit accruals and certain forms of benefit distributions; plan actuarial and financial reports; withdrawal liability of contributing employers; and participants' rights and obligations under automatic contribution arrangements. The PPA gives the department authority to assess civil monetary penalties of up to $1,000 per day against plan administrators for violations of the new disclosure requirements. The proposed regulation sets forth the administrative procedures for assessing and contesting such penalties and does not address substantive provisions of the new
disclosure requirements."

Related Links:

• News Release
• DOL Proposed Regulation – Civil Penalties Under ERISA Section 502(c)(4) (December 19, 2007) [HTML]
• DOL Proposed Regulation – Civil Penalties Under ERISA Section 502(c)(4) (December 19, 2007) [PDF]

• Proposed regs issued on civil penalties for noncompliance with ERISA disclosure rules
• DOL proposes protocol to assess penalties on failed disclosures
• Plans to Be Fined on Disclosure Issues

DOL Proposed Regulation - Reasonable Contract or Arrangement Under Section 408(b)(2)--Fee Disclosure

29 CFR Part 2550

RIN 1210-AB08

DOL Proposed Regulation - Reasonable Contract or Arrangement Under Section 408(b)(2)--Fee Disclosure

According to a news release, the U.S. Labor Department is proposing regulations to increase the disclosure of fees and conflict of interests affecting 401(k) and other employee benefit plans:

"Washington – The U.S. Department of Labor today announced a proposed rule that will enhance disclosure to fiduciaries of 401(k) and other employee benefit plans to assist them in determining the reasonableness of compensation paid to plan service providers and conflicts of interest that may affect a service provider's performance under a service contract or arrangement.

"One of the department's top priorities is improved disclosure in order to ensure that participants and fiduciaries have the information they need to make informed decisions," said U.S. Secretary of Labor Elaine L. Chao. "We are working quickly to implement regulations that foster fair, competitive and transparent prices for services as well as combat excessive or hidden plan fees."

The proposed regulation would enhance disclosure to plan fiduciaries by requiring that contracts between certain service providers and plans provide for specific and detailed information. The proposal requires that all services furnished to a plan and all compensation, direct and indirect, to be received by the service provider be disclosed in writing. The proposal also requires the disclosure of possible conflicts of interest of the service provider that may affect the performance of plan services.

In addition, the department is proposing a class exemption to provide relief to plan fiduciaries who enter into deficient contracts with service providers that, unbeknownst to the plan fiduciary, failed to comply with their disclosure obligations.

401(k) savings and other employee benefit plans are critical to the retirement and health security of American workers and their families," said Bradford P. Campbell, assistant secretary for the Labor Department's Employee Benefits Security Administration. "This initiative enhances disclosure of fees and conflicts of interest that can affect workers' interests and is an important part of our continued efforts to enhance workers' benefit security.""

The fact sheet describes the following disclosure requirements:

"Disclosure of Services and Compensation - The terms of the contract must require that the service provider disclose information regarding all services to be performed and all compensation that will be received either directly from the plan or indirectly from parties other than the plan or plan sponsor. The proposal includes a definition of "compensation or fees" and rules for bundled service providers and for estimating the amount of prospective compensation.

Disclosure of Conflicts of Interest - Service providers also must disclose information about relationships or interests that may raise conflicts of interest for the service provider in performing plan services. Specifically, service providers must describe:

• any participation or interest of the service provider in transactions to be entered into by the plan pursuant to the contract;
  
• any material relationships with other parties that may create conflicts of interest;
  
• any compensation the service provider may receive that it can affect without prior approval by an independent fiduciary; and
  
• any policies or procedures in place to address potential conflicts of interest.

Ongoing Disclosure Obligations - The proposal includes ongoing disclosure obligations relating to:

• Material Changes: During the term of the contract, a service provider must disclose material changes to information previously furnished within 30 days of such changes.
  
• Reporting and Disclosure Requirements: Service providers must disclose compensation or other information related to the contract or arrangement that is requested by the responsible plan fiduciary or plan administrator in order to comply with ERISA's reporting and disclosure requirements.
  
• Actual Performance: The proposal also includes an explicit requirement that service providers actually make the required disclosures."

Related Links:

• News Release
• Fact Sheet
• DOL Proposed Regulation - Reasonable Contract or Arrangement Under Section 408(b)(2)--Fee Disclosure (December 13, 2007) [HTML]
• DOL Proposed Regulation - Reasonable Contract or Arrangement Under Section 408(b)(2)--Fee Disclosure (December 13, 2007) [PDF]
• DOL Notice - Proposed Class Exemption for Plan Fiduciaries When Plan Service Arrangements Fail To Comply With ERISA Section 408(b)(2) (December 13, 2007) [HTML]
• DOL Notice - Proposed Class Exemption for Plan Fiduciaries When Plan Service Arrangements Fail To Comply With ERISA Section 408(b)(2) (December 13, 2007) [PDF]
• DOL Final Regulation - Annual Reporting and Disclosure
• DOL Proposed Regulation - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure
• DOL Notice - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure

• The DOL’s Proposed 408(b)(2) Regulation: Impact on Broker-Dealers and Registered Representatives
• DOL proposes full disclosure plan
• ASPPA Suggests Clarification of DOL Proposed Plan Fee Regulations
• DOL Proposes Fee Disclosure Rules
• Employee Benefits Advisory: Department of Labor Issues Guidance on 401(k) Plan Fees
• The DOL’s Proposed 408(b)(2) Regulation: Impact of the Mandated Disclosures on Registered Investment Advisers (RIAs)
• The pain of disclosure: DOL officials say investment-only funds must reveal fees
• DOL Takes Action on Disclosure of Compensation
• Department of Labor Advances Fee Disclosure Initiatives for ERISA Plan Service Providers
• Recent DOL Actions Increase Obligations of Service Providers
• More Information on Fee Disclosure Proposed Regulations
• Do proposed rules for 401(k) fees do enough to ensure disclosure?
• DOL proposed regs require service providers to furnish detailed fee disclosures to plan fiduciaries
• Disclosure may cut revenue-sharing payments
• DOL Issues Proposed Regulations on Fee and Conflict of Interest Disclosures by Service Providers
• Proposed Labor Regulations Would Require Greater Disclosures of Fees, Compensation and Conflicts of Interest for Employee Benefit Plan Service Providers
• Department of Labor Finalizes Form 5500 Fee Disclosure Rules and Proposes Guidance for Contracts Between Plans and Service Providers Under ERISA 408(b)(2)
• New Disclosures of Adviser Compensation Required on Form 5500
• DOL Issues Long-Awaited Proposed Fee Disclosure Regulations
• Investment Company Institute Comments
• Summary: DOL Proposed 408(b)(2) Regulations on Fee Disclosure
• Reasonable Compensation Proposed Regs Floated by DOL
• Proposed Plan Regs Require Glimpse Inside The Bundles
• Legal Alert: DOL Proposes New ERISA Disclosure Requirements for Plan Service Providers
• EBSA Puts Out Provider Fee Disclosure Proposal
• Final Revised Form 5500 -- New Fee Reporting Rules
• Transparency Urged for 401(k) Fees: Labor Dept. Regulation Would Put Plans' Costs in Writing
• 401(k) Disclosure Regs Floated