DOL Fiduciary Rule Set for First-Half 2012 Release

Like other industry officials, Craig Hoffman, general counsel and director of regulatory affairs for the American Society of Pension Professionals and Actuaries (ASPPA), told DOL in a Dec. 19 letter that while ASPPA supports DOL's efforts to improve fee disclosure for individual retirement plans, "unfortunately the application of both the interim 408(b)(2) and 404(a) regulations is only three months away and the DOL has not issued the final guidance needed to create systems to comply with the regulations."

Hoffman urged DOL to extend the deadline for complying with 408(b)2 and 404(a) fee disclosure regulations as the department had yet to issue final guidance on either. As the DOL spokesperson stated, that final guidance should be out by the end of January.

EBSA announced in July that it was extending the interim final rule deadline on its plan level fee disclosure rule, 408(b)(2), to April 1, 2012. But Hoffman told DOL that the effective date for the fee disclosure regs should be "no earlier than one year after the 408(b)(2) regulation is published in final form."

A Delay Past April 1?

However, Reish of Drinker Biddle & Reath says that "at this point, though, I think the DOL has to delay the effective date because it is too late for providers to adjust their disclosure procedures and materials by April 1 to take into account any change; it's just impossible."

That should also mean, Reish says, "that the participant disclosures under 404a-5 will be extended, since they are effective 60 days after the 408(b)(2) regulation is effective."

Reish went on to note that the DOL disclosure regulations for both plan sponsor and participant disclosures are "not clear about the treatment of brokerage accounts for a plan (for example, a small profit-sharing plan) or for a participant-directed plan (for example, a self-directed brokerage account in a 401(k) plan)."

The DOL has given informal guidance about the disclosures that must be made to participants, and those disclosures are minimal, Reish says.

However, Reish notes that where a 401(k) plan consists exclusively of individual brokerage accounts, there are practical issues about how to comply with the 404a-5 disclosures generally. "Since the brokerage accounts are not 'designated investment options,' there are only minimal disclosures which must be made concerning the brokerage accounts." However, he says, where only brokerage accounts are offered, "the structure will not ordinarily include a recordkeeper. As a result, the plan sponsor—perhaps in conjunction with a compliance-only third-party administrator—must make the non-investment participant disclosures, which includes the general disclosures, the administrative expense disclosures and the individual expense disclosures—as well as the quarterly statements."

Based on Reish's firm's discussions with broker-dealers, he says, "there is a lack of awareness of the requirements for the non-investment disclosures under the 404a-5 participant disclosure regulation. As a result, there will be compliance issues in this scenario."