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Member, Beacon International Group, Ltd.
WASHINGTON—Employers with 401(k) and other participant-directed individual account plans will have to disclose the fees and expenses of the investment options offered by the plans under final rules unveiled Thursday by the Labor Department.
For calendar-year plans, the rules, to be published in the Oct. 20 Federal Register, will go into effect on Jan. 1, 2012.
The final regulations are intended to improve disclosure of fees and expenses for investments in participant-directed individual account plans, such as 401(k) plans. The Labor Department estimates there are 483,000 such plans.
The centerpiece of the regulations is a new requirement that plan sponsors develop and distribute to participants a comparative chart with investment-related information, including fees and expenses.
The first part of the chart will list by category the name of each investment option, such as equity or bond funds; the website for each investment option, the average annual total return during the past year, five years, 10 years and since inception; and rates of return for the comparable time periods for a benchmark index applicable for each index.
The second part of the chart will list each investment option, its total operating expenses and fees that participants are charged. Examples include annual service charges assessed if the value of investments held in the option fall under a certain dollar amount and the charges that some funds impose on amounts withdrawn before maturity.
Aside from the chart, employers also will have to disclose to participants on a quarterly basis the actual dollar amounts charged to their accounts during the preceding quarter for specified administrative expenses.
A summary of the requirements are available at "a href="http://www.dol.gov/ebsa/newsroom/fsparticipantfeerule.html" target="_new">www.dol.gov/ebsa/newsroom/fsparticipantfeerule.html.