Department of Labor Issues New Disclosure Requirements for 401(k) Plans

On October 20, 2010, long-awaited Department of Labor (DOL) rules were released in their final form.  The new rules require plan fiduciaries, specifically the companies sponsoring 401(k) plans, to make detailed disclosures to plan participants. The rule officially takes effect December 20, 2010; however, the new disclosure obligations will only be enforced beginning with plans having a fiscal year end on or after November 1, 2011. Accordingly, plans with a fiscal year end of December 31st, must make the new, required disclosures beginning January 1, 2012.

As it applies to 401(k) administrators, the rule requires:

  • Quarterly statements of the plan’s fees and expenses deducted from participants accounts
  • Administrators to give participants information about investments available under their plan, including the cost of these investments
  • Performance data regarding the various mutual funds offered under the plan, including one year, five year, and ten year returns. Also, appropriate benchmarks must also be provided for those time periods in order to enable investors to determine the overall performance of the offered funds
  • Administrators must use standard mythologies when calculating expense and return information
  • Information must be presented  in an easy to understand format in order to enable workers to compare the various investment options available under the plan
  • The explanation of the fees and expenses associated with the funds a worker chooses must be explained as a percentage of assets held, and also expressed as a dollar amount for each $1,000 invested.

For more information regarding the required disclosures for plan administrators under this rule, please contact us at (619) 278-0020. Full text of the final rule can be found here: http://webapps.dol.gov/FederalRegister/HtmlDisplay.aspx?DocId=24323&AgencyId=8&DocumentType=2