5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The Department of Labor's Employee Benefits Security Administration (EBSA) has issued final regulations governing the fiduciary requirements for disclosure of fees and expenses associated with participant-directed individual account retirement plans. The final regulations are effective on December 20, 2010 (60 days after the date of publication in the Federal Register). The regulations become applicable to covered individual account plans for plan years beginning on or after November 1, 2011. For calendar year plans, compliance will be required on January 1, 2012.
"This rule provides uniform disclosure to workers about what they pay for investment options in their retirement plans," said Secretary of Labor Hilda L. Solis. "For the first time, workers will have at their fingertips important and accessible investment-related information to comparison shop among the plan options available to them."
The final regulations provide plan administrators protection from liability for the completeness and accuracy of information provided to participants if the plan administrator reasonably and in good faith relies upon information provided by a service provider.
The final regulations require plan administrators to provide to each participant or beneficiary certain plan-related information about the structure and mechanics of the plan. This plan-related information must be given to participants on or before the date they can first direct their investments, and then again annually thereafter.
The plan-related information includes an explanation of how to give investment instructions under the plan, a current list of the plan's investment options, and a description of any "brokerage windows" or similar arrangement that enables the selection of investments beyond those designated by the plan. The information must also include an explanation of two types of fees and expenses:
Quarterly statements of actual charges or deductions
In addition to the plan-related information that must be furnished up front and annually, participants must receive statements, at least quarterly, showing the dollar amount of the plan-related fees and expenses (whether "administrative" or "individual") actually charged to or deducted from their individual accounts, along with a description of the services for which the charge or deduction was made. These specific disclosures may be included in quarterly benefit statements required under ERISA §105.
Standard methodologies must be used when calculating and disclosing expense and return information to achieve uniformity across the spectrum of investments that exist in plans.
Annual investment-related information
Investment-related information must be furnished to participants or beneficiaries on or before the date they can first direct their investments, and then again annually thereafter. Investment-related information about each investment option under the plan includes:
The final regulations specify that investment-related information includes an internet website address that is sufficiently specific to provide participants and beneficiaries access to specific additional information about the investment options for workers who want more information or more current information. In addition, investment-related information should include a general glossary of terms to assist participants and beneficiaries in understanding the plan's investment options, or an internet website address that is sufficiently specific to provide access to such a glossary.
Comparative format requirement
Investment-related information must be furnished in a chart or similar format designed to facilitate a comparison of each investment option available under the plan. The final regulations include, as an appendix, a model comparative chart, which when correctly completed, may be used by the plan administrator to satisfy the requirement that a plan's investment option information be provided in a comparative format.
In addition, after a participant has invested in a particular investment option, he or she must be provided any materials the plan receives regarding voting, tender or similar rights in the option. Upon request, the plan administrator must also furnish prospectuses, financial reports and statements of valuation and of assets held by an investment option.
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