ERISA Rule 404a-5 was enacted in order to provide greater transparency to investors in 401(k) type pension plans. The rule was adopted two years ago, but the August 30, 2012 deadline for plan administrators to issue the required disclosures is just around the corner. As reported earlier this year, the August 30th deadline gives plan sponsors 60 days from the July 1, 2012 deadline for service providers to provide specific disclosures related to their costs and expenses to plan sponsors.
The Rule requires plan administrators to provide plan participants with certain plan-related and investment-related information, including:
- General plan information about the structure and mechanics of the plan, such as how to give investment instructions, the plan’s investment options, and any arrangements that enable participants to select investments beyond those designated.
- An explanation of any fees and expenses for general plan administrative services that are charged or deducted from all individual accounts and any fees and expenses that may be charged or deducted from individual accounts based on actions taken by the individual.
- Required investment-related information includes performance data and benchmark information, as well as fees and expenses associated with the investments, such as operating expenses and shareholder fees, and any restrictions on the ability to purchase or withdraw from an investment.
The plan-related information must be provided to participants before they can direct their first investment and then annually thereafter. In addition, participants must receive at least quarterly statements showing the dollar amount of plan-related fees and expenses that were actually charged or deducted from the account, as well as a description of the services for which the charge or deduction was made.
Although investments advisers completed their required disclosures under Rule 408b-2 to plan sponsors, plans will undoubtedly be turning to their service providers for help with their required disclosures.
For assistance addressing plan questions about the required disclosures or any other compliance concern please contact Sarah Weber at sarah.weber@jackolg.com or (619)298-2880.
