September 21, 2020

Volume X, Number 265

September 18, 2020

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Required Disclosures to Plan Participants - Rounds 2 and 3

At this time last year plan administrators for most participant-directed, individual account retirement plans were focused on complying with a U.S. Department of Labor (DOL) regulation that required disclosure of detailed plan expense and investment information to participants by deadlines which ranged from August 30 to November 30, 2012, depending on their plan years (see our prior alert here). The regulation requires similar disclosures "at least annually," which it currently defines to mean "at least once in any 12-month period." For example, if a plan's initial disclosure was distributed on August 25, 2012, the second one would be due no later than August 25, 2013. However, if the second disclosure was accelerated to March 31, 2013, a third version would be due by March 31, 2014.

A recent DOL Field Assistance Bulletin affords administrators a one-time opportunity to reset each plan's disclosure schedule. If a plan's second disclosure has yet to be furnished, the deadline is extended to 18 months after the date of the initial disclosure. If the first disclosure was provided on August 25, 2012, the second one can be delayed as late as February 25, 2014.

If the second disclosure has been or will be made by the first anniversary of the initial disclosure, the Bulletin allows an 18-month period for the third disclosure. For example, if the second disclosure was made on March 31, 2013, the deadline for the third one is extended to September 30, 2014.

A note of caution is warranted. The Bulletin indicates a reset option can be exercised only if the plan administrator "reasonably determines that doing so will benefit participants and beneficiaries." Possible justifications include the provision of more current information and minimizing plan expenses charged to participants' accounts.

The one-time reset option is appreciated, but it does not address the fundamental problem with the regulation. In its zeal to assure that participants receive disclosures every year, DOL adopted a regulation which encourages a plan administrator to delay distribution of the annual disclosure to avoid accelerating subsequent deadlines. Fortunately, the Bulletin reports that DOL is "considering whether to revise the regulation's timing requirement to provide reasonable flexibility to plan administrators on a permanent basis." A suggestion would be to allow a 15-month period, measured from the previous disclosure, as long as there is at least one disclosure during every plan year.

Copyright © 2020 Godfrey & Kahn S.C.National Law Review, Volume III, Number 235


About this Author

John Donahue Tax & Employee Benefits Attorney

John Donahue is a shareholder in the Tax and Employee Benefits Practice Group. He works in the Milwaukee office.

John’s practice includes tax, employment and corporate law with a primary emphasis on employee benefits. He advises businesses and their owners regarding the design, installation, maintenance and termination of pension plans, 401(k) programs, employee stock ownership plans and other benefit programs. John provides guidance on the employee benefit aspects of mergers and acquisitions, and he assists clients in responding to regulatory inquiries and disputed benefit claims....