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Know your ERISA risk as a fiduciary under 404(a)(5) regulations

June 26, 2012

August 30th Regulation Deadline Impacts Fee Transparency & Plan Expenses.

The new 404 (a)(5) regulation will probably have the most impact regarding your fee transparency and plan expenses. 404(a)(5), which becomes effective August 30, 2012, is meant to provide more information to plan participants regarding plan expenses and investment performance so that they may make informed decisions regarding their participation in their company’s retirement plan.

It is the company’s responsibility to disclose fees to plan participants. However, in most cases, the company will probably be relying heavily on their third party administrator in order to distribute this information to the participants. As a fiduciary, it is your job to ensure the information is being distributed to the participants.

The deadline for initial annual disclosures to participants is August 30, 2012 (or upon hire for participants hired after June 1, 2012). These disclosures must include the following:

General plan information, describing the structure and mechanics of the plan

  1. How participants may give investment instructions
  2. Investment options, including any self directed brokerage options
  3. The designated investment manager

Plan Administrative and Participant Specific Fees

  1. Description of the fees that can be charged against the participant’s account
  2. How the fees are charged (bps, flat fee, etc.)

Investment Information

  1. A description of each investment option
  2. Extensive information pertaining to performance data and fees for each investment option

Regulations regarding quarterly disclosures are also very strict with specific information which must be provided to participants via their quarterly participant statements, beginning with the third quarter of 2012. This information must include the following:

  1. Dollar amount of expenses and fees charged to the participant’s account
  2. Description of the services to which the expenses relate
  3. Whether any of the plan’s administrative fees were paid from operating expenses or from one of the plan’s investment options

As a result of the new fee disclosure regulations and the changes to your participant’s statements, there will be lots of questions that will arise. Consider some of the most common questions your participants may have. Try to prepare for them ahead of time. Most importantly, work closely with your service providers to ensure you are fulfilling your fiduciary responsibilities as the ultimate responsibility rests with you as plan fiduciary.

For more information on the new ERISA fiduciary regulations read our blog series:

Part 1: “Retirement Plan Fiduciary Duty
Part 2: “New ERISA 408(b)(2) Fee Disclosure Deadline- July 1, 2012

Visit the employee benefit plan page on our website. To learn more about pension plans or with questions regarding this blog please contact any member of our retirement services team at

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