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SEC No-Action Letter Permits Non-ERISA Retirement Plans to Issue Participant Fee Disclosures Without Violating Securities Laws

In a no-action letter dated February 18, 2015, the U.S. Securities and Exchange Commission (SEC) extended relief from the application of Rule 482 of the Securities Act of 1933 to certain retirement plans that are exempt from the Employee Retirement Income Security Act of 1974, as amended (ERISA) (e.g., certain deferral only 403(b) plans, governmental 457(b) plans, church plans).

When the U.S. Department of Labor (DOL) issued final regulations in 2010 pertaining to participant-level fee disclosures for tax-qualified retirement plans that provide for participant-directed investments, it was identified that the DOL-required disclosures might be inconsistent with certain disclosure requirements under SEC Rule 482.  Rule 482 provides parameters around information provided by an investment company that could be classified as advertisements (e.g., investment performance data).  Because of the potential conflict between the DOL regulations and Rule 482 (pertaining to such items as timing of updated investment information as well as various narrative disclosures), the SEC issued a no-action letter in October 2011 stating “[the SEC] agrees to treat information provided by a Plan Administrator to Plan Participants…that is required by and complies with the disclosure requirements set forth in the DOL Rules as if it were a communication that satisfies the requirements of Rule 482…”  This alleviated the tension created when an ERISA plan attempted to comply with both set of rules and concluded that it could simply follow the DOL final regulations instead without violating Rule 482.

Although the DOL disclosure regulations apply only to ERISA plans, many plan sponsors offering retirement plans not subject to ERISA find that participants benefit from the same investment disclosure information.  However, those same plan sponsors found that they were not exempt from the application of Rule 482, because the October 2011 no-action letter does not extend to non-ERISA plans.  Consequently, the SEC has now issued a comparable no-action letter to equally cover participant-level fee disclosure statements issued to participants in non-ERISA plans (including, but not limited to, non-ERISA 403(b) plans, governmental and non-governmental 457(b) plans, governmental 401(a) plans, 415(m) plans, church 401(a) plans, governmental or tax-exempt 457(f) plans, and governmental or tax-exempt 409A plans).

In order to avail itself of the protection of the SEC no-action letter, a non-ERISA plan must comply with the following:

  • Each investment vendor must enter into a written agreement with the plan sponsor that the vendor will provide the DOL required investment information on each investment option it offers under the particular non-ERISA plan, as well as the respective fee and expense information, to the extent it is available.

  • The written agreement must state the date on or before which the investment vendor will provide the information to the non-ERISA plan participants.

  • The investment vendor must agree to update the investment information at least annually, update the performance information at least quarterly (disclosed on an internet website address listed pursuant to the DOL requirements) and identify a designated contact person as a source of additional information to address participant requests for information specified in the DOL disclosure regulations.

  • The investment information must be provided to new participants before their first investment and to all other participants at least annually.

  • The investment information cannot include any other information that is not otherwise required to comply with the DOL disclosure regulations.

Assuming the above conditions are satisfied, the SEC will treat the DOL disclosure as not violating Rule 482.

Sponsors of non-ERISA plans might want to consider providing fee disclosures to participants now that the SEC has extended relief from Rule 482.  Since the relief for ERISA and non-ERISA plans is now aligned, many sponsors of non-ERISA plans may be able to utilize standard fee disclosure services provided by recordkeepers without violating SEC rules.

© 2020 McDermott Will & EmeryNational Law Review, Volume V, Number 78



About this Author

Mary K. Samsa, Corporate Lawyer, Executive Compensation Attorney, McDermott Will Emery, Law firm

Mary K. Samsa is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.

Mary has more than 15 years of experience and has represented a wide range of organizations including, but not limited to, Fortune 100 public companies, privately held companies, multinational organizations and not-for-profit hospital systems as well as educational institutions.  Mary’s primary practice focuses on executive compensation (for both taxable and tax-exempt entities) where she regularly advises on nonqualified deferred compensation...

Todd A. Solomon apension 401k attroney  McDermott Will & Emery LLP, Chcago

Todd A. Solomon is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  Todd focuses his practice primarily on designing, amending, and administering pension plans, profit sharing plans, 401(k) plans, employee stock ownership plans, 403(b) plans, and nonqualified deferred compensation arrangements.  He also counsels privately and publicly held corporations and tax-exempt entities regarding fiduciary issues under ERISA, employee benefits issues involved in corporate transactions, executive compensation matters, and the implementation of...

Brian J. Tiemann, Labor Attorney, McDermott Law Firm

Brian J. Tiemann is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.   Brian focuses his practice on a variety of employee benefits matters related to pension plans, 401(k) plans, employee stock ownership plans (ESOPs), cafeteria and welfare plans, executive compensation and the implementation of benefit programs for domestic partners of employees.  He is a member of the Firm’s ESOP Affinity Group and has worked with clients to structure and maintain the qualified status of their ESOPs with the Internal Revenue...