EBSA rule adds deadline flexibility for 401(k) plans providing annual investment information to participants

The Employee Benefits Security Administration (EBSA) has issued a direct final rule and a companion proposed rule that provide a two-month grace period for participant-directed individual account plans—e.g., 401(k) plans—to furnish annual plan and investment-related information (including fee and expense information) to participants.

In Field Assistance Bulletin (FAB) 2013–02, EBSA made it clear that ERISA Reg. §2550.404-5 requires annual disclosures to be made no more than one year exactly (e.g., 365 days) after the prior annual disclosures. However, EBSA was concerned that the requirement that disclosures be made no more than one year exactly from the prior annual disclosures might impose undue administrative burdens on plans. Therefore, FAB 2013–02 solicited public comments on whether EBSA should amend the regulation to provide plan administrators with more flexibility on the timing for furnishing the annual disclosures.

Direct final rule

The direct final rule changes the requirement that annual disclosures must be made at least once in any 12-month period to at least once in any 14-month period. The additional two months were added in response to comments indicating that plan administrators need more flexibility for these annual disclosures to avoid potentially unnecessary costs and burdens, EBSA explained. However, the change in timing ensures that participants still will receive annual disclosures on a consistent and regular basis. The information currently required to be disclosed, which assists workers in making informed plan and investment decisions about their retirement savings, remains unchanged.
EBSA notes that FAB 2013-02, which also provides a one-time “re-set” opportunity under which EBSA, as an enforcement matter, would treat a plan administrator as satisfying the annual disclosure requirement if the administrator furnished the comparative chart of investment information and other investment-related information no later than 18 months after furnishing the prior disclosures, is not affected by the direct final rule. Thus, to the extent it is otherwise available, an administrator does not lose the re-set relief in FAB 2013-02 for the second annual disclosure (the 2014 comparative chart) because of the direct final rule.

Effective date

The amended regulation will be effective June 17, 2015, without further action or notice, unless significant adverse comment is received by April 20, 2015. EBSA has issued a notice of proposed rule along with the direct final rule. If the Agency receives significant adverse comment during the public comment period, it will withdraw the direct final rule and it will not take effect. EBSA will address those comments in a subsequent final rule based on the proposed rule. The regulation will be applicable to disclosures made on or after June 17, 2015.

Enforcement policy

A temporary enforcement policy, effective immediately, generally will apply until the direct final rule takes effect, EBSA said. As an enforcement matter, EBSA will treat a plan administrator as satisfying the current 12-month rule if annual disclosures are made within the new 14-month deadline, provided that the plan administrator reasonably determines that doing so benefits the plan’s participants and beneficiaries. If the direct final rule is withdrawn because of significant adverse comment, EBSA will provide further guidance on this enforcement policy in the notice announcing the withdrawal of the rule. The relief under this policy is in addition to the relief previously granted under FAB 2013–02 and is available regardless of whether a plan has used the relief in FAB 2013–02 to reset the first (the 2013 comparative chart) or second applicable annual disclosure.

Source: 80 FR 14301, March 19, 2015.

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