How to Take Action
So how can plan advisers help sponsors prepare for the 404(a)(5) deadline? Plan sponsors must first be educated on their fiduciary responsibility, Nelson said, and then understand the information their recordkeepers need in order to meet the participant disclosure regulation. For example, small 401(k) plans often use a third-party administrator (TPA) to calculate eligibility, so the recordkeeper must acquire the information from the plan sponsor or TPA.
Advisers should review the information the recordkeeper will provide the plan sponsor for 404(a)(5) to ensure it includes everything required in the disclosure, Nelson said. “Advisers should engage in conversation with recordkeepers to review samples of all fee disclosure documents for their plan sponsors,” he explained. “While actual disclosure documents may not be available today, templates are likely available and should be reviewed, along with the timeline expected for receipt of the disclosures.”
Advisers and sponsors should discuss the timeline in which the disclosures will be distributed and who will be sending them to participants, beneficiaries and eligibles as required, Nelson added.
Annual disclosures, initial disclosures and quarterly statements must be reviewed, Reish said. The retirement plan website must also be examined to make sure all the designated investment alternatives are represented accurately, and that all the required information under 404(a)(5) is included, according to Nelson. “Special attention should be made of challenging areas around unique investment options such as ‘custom’ models, employer stock [and] non-publicly traded investment options to assure required website information will be available,” he added.
Although it is not required by the DOL to offer the investment information on a single website, Nelson said he believes one website is the best practice to make it user-friendly.
Sponsors should determine whether the information seems complete and is also easy to understand, Reish added. “The purpose of the rule is to help participants,” Reish said. “Are [the disclosures] written in a way that participants can understand them? Are they helpful?”
Once the actual disclosures are made available, the sponsor and adviser should review them together before sending, Nelson concluded.