DOL Permits 401(k) Plans to Reschedule Annual Comparisons to Employees to Combine with Other Annual Disclosures

The Department of Labor has announced a temporary enforcement policy that allows 401(k)-type defined contribution plans to reset the timing for the annual distribution of the investment comparative chart that they are required to furnish to plan participants.  Under the enforcement policy contained in Field Assistance Bulletin 2013-02, plan administrators may reset the deadline one time, for either the 2013 or 2014 comparative chart, if the responsible fiduciary determines that doing so will benefit the plan's participants and beneficiaries, and provided that no more than eighteen (18) months may pass before participants receive their next comparative chart.  The DOL was responding to requests from plan administrators and service providers to provide plans more flexibility so that the annual deadline for furnishing comparative charts could be aligned in a cost-effective manner with the furnishing of other participant notices and disclosures. 

The DOL's participant-level fee disclosure regulation (published in 29 CFR section 2550.404a-5), which was implemented last year, requires that administrators of 401(k)-type plans disclose information about plan investment options, such as fee and performance information, to participants and beneficiaries at least annually.  Plans operating on a calendar year had to furnish their first chart no later than August 30, 2012, and their second chart is due no later than August 30, 2013.  Many other plan disclosures, however, such as pension benefit statements, are disclosed later in the calendar year.  Permitting a one-time "re-set" of the deadline will allow plan administrators to align the comparative chart with other participant disclosures. 

This enforcement policy does not alter a plan administrator's obligations under the regulation to timely update the investment information that is available at the plan's internet web address or to notify participants about changes to investment information, such as a new plan investment option.

The Employee Benefits Security Administration (EBSA) acknowledges in the Field Assistance Bulletin that it has not addressed concerns that the current timing requirement may result in a fixed annual deadline for comparative charts.  Accordingly, EBSA stated that it is considering whether to revise the regulation's timing requirement to provide reasonable flexibility to plan administrators on a permanent basis.

The Fid Guru's TakeThis FAB demonstrates that the EBSA under Assistant Secretary for Employee Benefits Security Phyllis C. Borzi is responsive and cares about the concerns of the employee benefits community.  Nevertheless, EBSA is still operating on the premise that disclosures make a difference.  As investment scandals like the recent Madoff ponzi scheme demonstrates, individual investors do not read most, if any, disclosures.  More disclosures will not solve the problem.  Indeed, the regulatory premise of requiring disclosures is likely naive -- many of these disclosures will not even be opened, regardless of when they are sent.