Participant-Level Disclosure Regulation ERISA Section 404(a)(5)

Detailed initial and quarterly disclosures must be made to participants and beneficiaries in participant-directed individual account plans to help them understand plan fees and make informed investment decisions. The rules took effect July, 1, 2012, for plans that operate on a Decemeber 31 plan year-end basis. For those plans, the initial disclosure must be given to all existing participants within 60 days, or by August 30, 2012, and the first quarterly disclosure of fees and expenses actually charged to each participant's account during the preceding quarter must have been made by November 14, 2012 (within 45 days of the end of the quarter).

Impact

Many participants are now for the first time becoming aware of how much they have been paying in fees. There is much speculation regarding how participants will react to this news. According to an AARP survey, 70 percent of participants believe their 401(k) plans are being managed for free, and two-thirds of the remaining participants believe their plan sponsors pay plan expenses.* The number one trigger for Department of Labor investigations is phone calls from disgruntled participants. A plan benchmark or RFP can assist with any potential accusations from participants or if the DOL comes knocking at your door. It's important that fees are reasonable and that participants are happy, we can help.

*AARP 401(k) Participants' Awareness and Understanding of Fees, February 2011

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