November 3, 2010

On October 15, 2010, the Department of Labor issued final regulations that create new fee disclosure requirements for 401(k) plans and other participant-directed retirement plans.  The regulations are intended to ensure that plan administrators provide participants with the information they need to make informed decisions about their retirement savings.
What  Information  Should  Be  Included?   The  new  participant  disclosure  is required to include two separate categories of information:  plan-related information and investment-related information.

Plan-Related Information. The disclosure is required to include each of the following:

• General plan information, including a list of available investment funds; the names of the plan’s investment manager(s); procedures through which participants and beneficiaries can make investment elections; restrictions on investments, transfers of investments, or voting rights; and a description of any arrangements that allow participants to invest in funds outside those directly offered by the plan (e.g., investments through individual brokerage accounts);
• Administrative expenses that may be charged to the plan, including a description of how expenses will be assessed and whether any expenses are paid from revenue sharing paid to the plan by the plan’s investment funds; and
• Individual  expenses,  including  charges  related  to  plan  loans, investment advice, investment management fees, or fees related to qualified domestic relations orders that are charged to an individual participant’s account.

Investment-Related Information. In addition to the plan-related information described above, the disclosure is also required to include the following information about each of the plan’s investment funds:

• Name and type of fund;
• Performance data, including average 1-, 5-, and 10-year returns (or, for funds with a fixed rate of return, the term and the rate of return);
• Benchmark    information     (e.g.,    a   comparison    of   the   fund’s performance to an appropriate index);
• Fees and expenses, expressed as total annual operating expenses and as a percentage of each $1,000 invested;
• Restrictions on a participant’s ability to purchase or withdraw from the fund;
• Web-site address where participants can find additional information about the fund, including identifying information, investment strategies, portfolio data, and updated performance data; and
• Glossary of general investment terms or a web-site address where such a glossary can be found.