April 09, 2012
--- Plan advisers should not delay helping plan sponsors prepare for the 404(a)(5) regulation as the deadline looms. ---
Under the Department of Labor’s (DOL’s) 404(a)(5) regulation, plan sponsors must provide fee information to participants by August 30, 2012. However, with all the attention surrounding the 408(b)(2) regulation—which requires most service providers of retirement plans to disclose information about fees and services to plan sponsors by July 1, 2012—some industry experts think preparation for 404(a)(5) is falling by the wayside.
Fred Reish, chairman of the financial services ERISA team at Drinker Biddle & Reath LLP, told PLANADVISER he is concerned about plan sponsors’ lack of urgency in preparing for 404(a)(5). He said he believes plan sponsors have a misconception that the burden of participant disclosure falls on the recordkeeper. In reality, Reish explained, the recordkeeper is simply a service provider operating under a contract and does not act as the fiduciary. Reish said he thinks many plan sponsors still do not fundamentally understand that they can be liable for participants’ investment decisions.
“It’s still the plan sponsor’s responsibility,” Reish said. “What [plan sponsors] haven’t really looked at is that the legal burden is on the ERISA plan administrator.”
Reish speculated several reasons that the same urgency in complying with 408(b)(2) has not been applied to 404(a)(5).