EBSA Proposed Rules

Requirements for Fee Disclosure to Plan Fiduciaries and Participants--Applicability Dates   [6/1/2011]
[PDF]
Federal Register, Volume 76 Issue 105 (Wednesday, June 1, 2011)
[Federal Register Volume 76, Number 105 (Wednesday, June 1, 2011)]
[Proposed Rules]
[Pages 31544-31545]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-13516]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2550

RIN 1210-AB08


Requirements for Fee Disclosure to Plan Fiduciaries and 
Participants--Applicability Dates

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed extension of applicability dates.

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SUMMARY: This document proposes to extend specified applicability dates 
of the Department's interim final rule concerning fiduciary-level fee 
disclosure (29 CFR 2550.408b-2(c), RIN 1210-AB08) and final rule 
concerning participant-level fee disclosure (29 CFR 2550.404a-5, RIN 
1210-AB07). These rules were published in the Federal Register on July 
16, 2010 and October 20, 2010, respectively. Extending these dates will 
more closely align the application of the two rules and ensure that 
parties have sufficient time to comply with the requirements of the 
rules.

DATES: Comments on the proposal to extend the applicability dates for 
the Department's fee disclosure rules should be submitted to the 
Department on or before June 15, 2011.

FOR FURTHER INFORMATION CONTACT: Michael Del Conte, Office of 
Regulations and Interpretations, Employee Benefits Security 
Administration, (202) 693-8500. This is not a toll-free number.

ADDRESSES: To facilitate the receipt and processing of comments, EBSA 
encourages interested persons to submit their comments electronically 
to e-ORI@dol.gov, or by using the Federal eRulemaking portal http://www.regulations.gov (following instructions for submission of 
comments). Persons submitting comments electronically are encouraged 
not to submit paper copies. Persons interested in submitting comments 
on paper should send or deliver their comments (preferably three 
copies) to: Office of Regulations and Interpretations, Employee 
Benefits Security Administration, Room N-5655, U.S. Department of 
Labor, 200 Constitution Avenue, NW., Washington, DC 20210, Attention: 
Fee Disclosure Applicability. All comments will be available to the 
public, without charge, online at http://www.regulations.gov and http://www.dol.gov/ebsa, and at the Public Disclosure Room, Employee Benefits 
Security Administration, U.S. Department of Labor, Room N-1513, 200 
Constitution Avenue, NW., Washington, DC 20210.

SUPPLEMENTARY INFORMATION: On July 16, 2010, the Department published 
in the Federal Register an interim final rule enhancing required 
disclosure from certain pension plan service providers to plan 
fiduciaries as part of a ``reasonable'' contract or arrangement for 
services under ERISA section 408(b)(2) (75 FR 41600) (the ``408(b)(2) 
regulation''). 29 CFR 2550.408b-2(c). The Department subsequently 
published in the Federal Register, on October 20, 2010, a final rule 
concerning the disclosure of plan fee and expense information by plan 
administrators to plan participants and beneficiaries (75 FR 64910) 
(the ``participant-level disclosure regulation''). 29 CFR 2550.404a-5. 
The participant-level disclosure regulation includes modifications to 
the disclosure requirements in the Department's regulation under ERISA 
section 404(c), at 29 CFR 2550.404c-1 (the ``404(c) regulation''), in 
order to avoid duplication and integrate its requirements with those of 
the new participant-level disclosure regulation.\1\
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    \1\ The amendments to the Department's 404(c) regulation apply 
for plan years beginning on or after November 1, 2011. The proposals 
contained in this document would have no effect on the applicability 
of these amendments.
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    Unless extended, the effective date for the interim final 408(b)(2) 
regulation will be on July 16, 2011 as to both new, and pre-existing, 
contracts or arrangements between covered plans and covered service 
providers. The Department has received many requests that this 
effective date be extended. A significant number of parties have argued 
that more time is essential to update systems and procedures for 
information collection and disclosure. Pointing out that the Department 
has not yet published a final rule, parties have explained that, if the 
Department modifies the current interim final rule, service providers 
will need additional time to make further changes. Based on these 
concerns, the Department believes that an extension of the rule's 
effective date would lead to fuller and timelier compliance by plans 
and service providers, and thus would be in the interests of 
participants and beneficiaries. Moreover, as discussed below, an 
extension will enable the Department to align the effective date for 
this regulation with the applicability date of the participant-level 
disclosure regulation. Accordingly, in February 2011, the Department 
announced its intention to extend the 408(b)(2) regulation's effective 
date until January 1, 2012.\2\ The Department has not received any 
negative comments on this announcement. The amendments proposed in this 
notice, if finalized, would effectuate this announcement.
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    \2\ See http://www.dol.gov/ebsa/newsroom/2011/ebsa021111.html.
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    Although the final participant-level disclosure regulation was 
effective on December 20, 2010, its requirements only begin to apply 
for plan years beginning on or after November 1, 2011. The regulation 
also includes a transitional rule, in paragraph (j)(3)(i), for 
furnishing disclosures required on or before the date on which a 
participant or beneficiary can first direct his or her investment. For 
participants or beneficiaries who, as of their plan's applicability 
date, had the right to direct the investment of their individual 
accounts, the plan must furnish these initial disclosures no later than 
60 days after the applicability date. As with the 408(b)(2) regulation, 
the Department has continued to receive requests that additional time 
be provided in order for parties to comply. Further, because the 
Department announced its intention to extend the 408(b)(2) regulation's 
effective date to January 1, 2012, parties argue that it would be 
preferable to extend application of the participant-level disclosure 
regulation until after the effective date of the 408(b)(2) regulation. 
Specifically, these parties point to the provision in the 408(b)(2) 
interim final regulation which requires

[[Page 31545]]

covered service providers to furnish information requested by a 
responsible plan fiduciary or plan administrator in order to comply 
with ERISA's reporting and disclosure requirements,\3\ which would 
include relevant information required to comply with the participant-
level disclosure regulation. It would facilitate compliance with the 
participant-level disclosure regulation, they argue, if contracts and 
arrangements were brought into compliance with the 408(b)(2) 
regulation, so that this reporting and disclosure provision is in 
effect, prior to the applicability of the participant-level disclosure 
regulation.
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    \3\ 29 CFR 2550.408b-2(c)(1)(vi).
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    The Department agrees that aligning the application of these two 
regulations would assist plan fiduciaries and plan administrators in 
obtaining information required to comply with the participant-level 
disclosure regulation. Further, the Department believes that, similar 
to the 408(b)(2) regulation, a limited extension is in the best 
interests of covered individual account plans and their participants 
and beneficiaries. Delayed application will better afford plans 
sufficient time to ensure an efficient and effective implementation of 
the participant-level disclosure regulation. To accomplish this end, 
the Department does not believe it is necessary to extend the 
regulation's effective date or its general application to plan years 
beginning on or after November 1, 2011. However, the Department 
proposes to extend the transition rule in paragraph (j)(3)(i), which 
specifies the date by which initial disclosures must actually be 
provided. Under this proposal, a plan would have 120 days (rather than 
60) after its applicability date to furnish the initial disclosures 
that are otherwise required to be furnished before the date on which a 
participant or beneficiary can first direct his or her investments. 
Thus, a calendar year plan would have to furnish the initial 
disclosures no later than April 30, 2012, and the disclosures required 
by paragraphs (c)(2)(ii) and (c)(3)(ii) (e.g., quarterly statement of 
fees/expenses actually deducted) would have to be furnished no later 
than May 15, 2012. Under the proposed transition rule, the initial 
disclosures must be provided to all participants and beneficiaries who 
have the right to direct their investments when such disclosures are 
furnished, not just to those individuals who had the right to direct 
their investments on the applicability date. This is to ensure that 
individuals who become plan participants in between the applicability 
date and the end of the 120-day period receive the important 
information required under the regulation. To the extent the plan also 
has contracts or arrangements with covered service providers, as 
defined by the 408(b)(2) regulation, those contracts or arrangements 
must be in compliance with the 408(b)(2) regulation as of January 1, 
2012, in advance of the required initial disclosures under the 
participant-level disclosure regulation.
    The Department has not been persuaded to extend the application of 
the participant-level disclosure regulation, or the 408(b)(2) 
regulation, beyond these dates. Although the Department believes it is 
appropriate to provide some relief to help ensure a timely, efficient, 
and coordinated implementation of the two rules, the Department also 
believes that it is critical for responsible plan fiduciaries, plan 
administrators, and plan participants and beneficiaries to benefit from 
the increased transparency provided by the rules as soon as possible.
    At this time, the Department solicits comments on this proposal to 
formally extend the effective date of the 408(b)(2) regulation and the 
transitional rule for application of the participant-level disclosure 
regulation.

List of Subjects in 29 CFR Part 2550

    Employee benefit plans, Exemptions, Fiduciaries, Investments, 
Pensions, Prohibited transactions, Real estate, Securities, Surety 
bonds, Trusts and Trustees.

    For the reasons set forth in the preamble, the Department of Labor 
proposes to amend 29 CFR part 2550 as follows:

PART 2550--RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY

    1. The authority citation for part 2550 continues to read as 
follows:

    Authority:  29 U.S.C. 1135, sec. 102, Reorganization Plan No. 4 
of 1978, 5 U.S.C. App. 1 and Secretary of Labor's Order No. 6-2009, 
74 FR 21524 (May 7, 2009). Sec. 2550.401c-1 also issued under 29 
U.S.C. 1101. Sec. 2550.404a-2 also issued under sec. 657, Pub. L. 
107-16, 115 Stat. 38. Sections 2550.404c-1 and 2550.404c-5 also 
issued under 29 U.S.C. 1104. Sec. 2550.408b-1 also issued under 29 
U.S.C. 1108(b)(1). Sec. 2550.408b-19 also issued under sec. 611, 
Pub. L. 109-280, 120 Stat. 780, 972. Sec. 2550.412-1 also issued 
under 29 U.S.C. 1112.

    2. Section 2550.404a-5 is amended by revising paragraph (j)(3)(i) 
to read as follows:


Sec.  2550.404a-5  Fiduciary requirements for disclosure in 
participant-directed individual account plans.

* * * * *
    (j) * * *
    (3) Transitional rules.
    (i) Notwithstanding paragraphs (b), (c) and (d) of this section, 
the initial disclosures required on or before the date on which a 
participant or beneficiary can first direct his or her investments must 
be furnished no later than 120 days after such applicability date.
* * * * *
    3. Section 2550.408b-2 is amended, in paragraph (c)(1)(xii), by 
removing the date ``July 16, 2011'' and adding in its place ``January 
1, 2012''.

    Signed at Washington, DC, this 26th day of May, 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
[FR Doc. 2011-13516 Filed 5-31-11; 8:45 am]
BILLING CODE 4510-29-P