EBSA Issues New Participant Disclosure Regulations

Federal regulators on Tuesday unveiled the long-awaited final portion of their three-part plan disclosures regulatory package that calls for sponsors of employee-directed plans to supply participants with basic plan information including investment returns and expenses.

The latest proposed rule from the Employee Benefits Security Administration (EBSA) mandates that required disclosures be provided generally when a participant becomes plan eligible and every year after that. Bradford P. Campbell, assistant secretary for the Labor Department’s EBSA, said the latest suggested rule was designed in part to pull together in a single document data that has traditionally been separately disclosed.

Under the proposal, the mandated disclosure is to be made in a comparative chart format. Regulators supplied a sample chart for a fictional retirement plan.

“What people want are simple, concise disclosures that aggregate plan information in useful ways,” Campbell told reporters during a Tuesday conference call.

When finalized, the regulation will be effective for plan years beginning on or after January 1, 2009, EBSA said.

The proposal requires plan fiduciaries to disclose basic information about the plan, such as:

  • available investment options;
  • how participants can give investment instructions;
  • a description of fees and expenses charged to participants and beneficiaries for plan administrative services, such as legal, accounting, and recordkeeping charges, as well as how these charges will be allocated to their individual accounts;
  • a description of fees and expenses charged to a specific participant’s account based on actions taken by that participant, such as charges for processing loans, QDROs, or investment advice; and
  • how to obtain more detailed information.

In addition, plan fiduciaries must disclose to participants, on a quarterly basis, the actual dollar amount charged to the participant’s account during the preceding quarter for specified administrative expenses.

Participant-Directed Plans

According to Campbell, the agency is proposing conforming changes to its regulation under 404(c) of the Employee Retirement Income Security Act (ERISA) to standardize disclosure requirements across various types of participant-directed plans. EBSA said the disclosure responsibility is higher because 401(k)-type plans give so much responsibility to participants to make their own decisions.

“This increased responsibility has led to a growing concern that participants and beneficiaries may not have access to, or if accessible, may not be considering information critical to making informed decisions about the management of their accounts, particularly information on investment choices, including attendant fees and expenses,” the regulators said in the proposed rule.

Last December, EBSA released the proposed mandated disclosures from service providers to plan fiduciaries, which Campbell said Tuesday should be finalized soon (See EBSA Releases Proposed Revisions to Provider Fee Disclosures).

More Disclosure Regulation Information

Additional information and original documents are available as follows:

  • The first portion of the DoL’s three-piece regulatory package focused on the Form 5500 and plan-level disclosures is discussed at DoL Announces Changes to 2009 Form 5500. A list of FAQs recently released by the DoL regarding the Form 5500 disclosure mandates is available here.
  • EBSA’s proposed provider disclosure rule – the second piece of the three-part package – is available here, along with public comments and formal testimony.
  • The latest proposed disclosure rule is available here. EBSA’s model participant disclosure chart is available here.