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NEW FEE DISCLOSURE RULES FOR RETIREMENT PLANS – WHAT MUST YOU PROVIDE TO PARTICIPANTS? Alice E. Helle BrownWinick 666 Grand Avenue, Suite 2000 Des Moines,

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Presentation on theme: "NEW FEE DISCLOSURE RULES FOR RETIREMENT PLANS – WHAT MUST YOU PROVIDE TO PARTICIPANTS? Alice E. Helle BrownWinick 666 Grand Avenue, Suite 2000 Des Moines,"— Presentation transcript:

1 NEW FEE DISCLOSURE RULES FOR RETIREMENT PLANS – WHAT MUST YOU PROVIDE TO PARTICIPANTS? Alice E. Helle BrownWinick 666 Grand Avenue, Suite 2000 Des Moines, IA Telephone: Facsimile:

2 DOL REGULATIONS ISSUED IN OCTOBER, 2012 Provide required disclosures by plan administrators to participants and beneficiaries in participant-directed retirement plans Applies to defined contributions plans subject to ERISA that permit participant-direction of any portion of the participant’s account, except for IRAs, SEPs, SIMPLE plans and certain 403(b) plan accounts Rules apply whether or not a plan complies with ERISA § 404(c)

3 DOL REGULATIONS ISSUED IN OCTOBER, 2012 (cont.) Plan administrator has fiduciary duty to ensure that –participants are made aware of their rights and responsibilities regarding the investment of the assets in their accounts and –are given sufficient information to be able to make informed decisions Compliance with the regulation provides no fiduciary relief re prudent selection and monitoring of plan services and investment alternatives

4 GENERAL PLAN INFORMATION The plan administrator must provide the following information: –How to gave investment direction instructions, including any applicable limitations; –How to exercise voting or similar rights;

5 GENERAL PLAN INFORMATION (cont.) –The designated investment alternatives (“DIAs”) available under the plan; A “designated investment alternative” is defined to mean any investment alternative designated by the plan into which participants and beneficiaries may direct the investment of assets held in their accounts The term does not include brokerage windows, self-directed brokerage accounts or similar arrangements that enable participants to select investments beyond those designated by the plan.

6 GENERAL PLAN INFORMATION (cont.) –Information relating to any designated investment managers to whom investment direction may be given; and –A description of any “brokerage windows” or similar arrangements that enable participants to select investments beyond those designated by the plan.

7 ADMINISTRATIVE EXPENSE INFORMATION The plan administrator must provide the following information: –Explanation of plan administrative fees and expenses (such as legal, accounting and recordkeeping) if not already included in the investment-related fees and expenses that may be charged to individual accounts and the method used to charge such expenses (e.g. pro rata or per capita); must be provided on or before participant is eligible to direct investments and at least annually thereafter

8 ADMINISTRATIVE EXPENSE INFORMATION (cont.) –Quarterly statement indicating the dollar amount charged during the preceding quarter to the individual’s account and a description of the services; –An explanation, if applicable, that, in addition to the fees and expenses disclosed above, some of the plan’s administrative expenses for the preceding quarter were paid from the total annual operating expenses of one or more of the plan’s DIAs (e.g. through revenue sharing or 12b-1 fees).

9 INDIVIDUAL EXPENSE INFORMATION The plan administrator must provide the following information: ‾Explanation of any fees and expenses that may be charged against the individual account based on services specifically to that account rather than the overall plan (e.g. plan loan processing, QDRO processing) must be provided on or before participant is eligible to direct investments and at least annually thereafter

10 INDIVIDUAL EXPENSE INFORMATION (cont.) ‾Statement provided at least quarterly stating the dollar amount charged during the preceding quarter for the above services and a description of the services

11 INVESTMENT-RELATED INFORMATION The plan administrator must provide the following information as to each DIA: ‾The name of the investment and the type or category of investment (e.g. money market fund, large-cap stock fund)

12 INVESTMENT-RELATED INFORMATION (cont.) ‾If investment return is not fixed, the average annual total return for the 1, 5 and 10 year prior periods, including a statement that past performance is not an indictor of future performance, and the name and returns of an appropriate bench-mark over such periods ‾If the investment return is fixed or stated, both the rate of return and term of the investment, and the details if the issuer may adjust the rate

13 INVESTMENT-RELATED INFORMATION (cont.) ‾If investment return is not fixed, the amount and description of any shareholder-type fees and total annual operating expenses for a one-year term expressed as a dollar amount for a $1,000 investment, along with a statement indicating that (i) fees and expenses are only one of several factors to be considered in making investment decisions, (ii) the cumulative effect of fees and expenses can substantially reduce account growth, and inviting participants to visit the DOL/EBSA website for examples

14 INVESTMENT-RELATED INFORMATION (cont.) ‾If the investment return is fixed, the amount and description of any shareholder-type fees and a description of any restrictions or limitations on purchase, transfer or withdrawal of the investment ‾A website address sufficient to provide specified information regarding each DIA ‾A general glossary of helpful terms or a website address that provides such a glossary; and

15 INVESTMENT-RELATED INFORMATION (cont.) ‾For an annuity DIA, specified disclosures unless already provided pursuant to the above. DOL Reg. § a-5(d)(1). ‾Comparative Chart. The regulations require the above investment info to be furnished in a chart or similar format to facilitate comparison. Instructions and a suggested format are provided at DOL Reg. § a-5(d)(2)-(4).

16 FORM AND MEDIUM OF DISCLOSURE ‾May be made as part of the plan’s SPD or quarterly benefit statements, as long as the applicable timing requirements are met. ‾Required disclosures may be made by electronic means Compliance with normal DOL electronic disclosure rules is not required Special rules that may be used in the alternative are provided in DOL Technical Release R.

17 EFFECTIVE DATES First annual disclosure deadline. The later of 60 days after –The regulatory effective date (first day of the first plan year starting after October 31, 2011; or –July 1, –For most plans, the first annual disclosure was due August 30, 2012

18 EFFECTIVE DATES (cont.) First quarterly disclosure deadline. –No later than 45 days after the quarter in which the initial annual disclosure was made –This would be 11/14/12 for a calendar year plan

19 Website: Toll Free Phone Number: OFFICE LOCATIONS: 666 Grand Avenue, Suite 2000 Des Moines, Iowa Telephone: (515) Facsimile: (515) Franklin Place Pella, Iowa Telephone: (641) Facsimile: (641) DISCLAIMER: No oral or written statement made by BrownWinick attorneys should be interpreted by the recipient as suggesting a need to obtain legal counsel from BrownWinick or any other firm, nor as suggesting a need to take legal action. Do not attempt to solve individual problems upon the basis of general information provided by any BrownWinick attorney, as slight changes in fact situations may cause a material change in legal result.


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