ASPPA Requests Transitional Relief & Clarification of Disclosure Deadline

The following is a statement from Craig P. Hoffman, General Counsel and Director of Regulatory Affairs of the American Society of Pension Professionals & Actuaries (ASPPA) from a comment letter to the United States Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) requesting transitional relief and clarification of the Final Rule on Fiduciary Requirements for Disclosure in Participant-Directed Individual Account.

“For nearly 50 years, ASPPA has championed the interests of both retirement plan professionals and participants. As a recent example, we have actively worked to promote improvements to the electronic disclosure rules that would provide participants with better investment tools and save the plan money that would otherwise be spent on the costs of mailing paper statements. This savings benefits the plan participants who are normally charged for a plan’s administrative costs.

Unfortunately, ASPPA is similarly concerned about the potential for unnecessary costs and increased administrative burdens associated with the ‘second round’ of annual disclosures required under the participant level fee disclosure regulation. The initial disclosure deadline was originally tied to the start of a plan year. However, it was extended to coincide with the effective date of the related 408(b)(2) regulation. The result is that most plans had until August 30, 2012, to make the “first round” of participant disclosures. This means the ‘second round’, which under the regulation is due ‘annually’ after the initial disclosure, would seemingly need to be made by August 30, 2013.

Unfortunately, the extension of the ‘first round’ deadline has not only created an arbitrary August deadline for 2013’s ‘second round’ of notices but also for all future “rounds” of annual participant disclosures. For most plans, particularly those that operate on a calendar year basis, an annual August deadline has no correlation to the timing of any other disclosures that the plan may be required to make. Therefore, the cost of the annual disclosure becomes a stand-alone expense, rather than enabling the plan administrator to combine it with other required plan disclosures. This is uneconomical for these plans and an unnecessary expense.

To avoid this problem, ASPPA recommends that the DOL provide for a one-time transitional realignment period during which plan administrators may choose to issue the ‘second round’ of annual participant disclosures no later than 2 ½ months after the start of the first plan year beginning on or after November 1, 2013. Additionally, the regulatory definition of ‘at least annually’ should be clarified to permit the annual notice to be distributed anytime during a calendar year as long as it is within 18 months of the distribution date of the preceding notice.

We believe adoption of this recommendation will result in a reduction in administrative costs and an improvement in participant communications without diminishing the importance or visibility of the 404a-5 disclosures, all to the benefit of plan participants and plan professionals alike.”

For more detail on ASPPA’s recommendations to the DOL read our comment letter .

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