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Labor extends date to comply with 401(k) fee disclosure rule


WASHINGTON—The Labor Department said Wednesday that it will give employers with 401(k) and other participant-directed plans more time to comply with a final rule requiring disclosure of fees and expenses of the investment options offered by the plans.

While the effective date for calendar-year plans remains Jan. 1, 2012, employers will have 120 days after the effective date to make their first disclosure of fee and expense information to plan participants, the department said. Last year, the department said the information would have to be distributed within 60 days.

As a result, calendar-year plans now have until April 30, 2012, to provide the information.

Employers will welcome the extra time, experts say. “There will be a little more time to do the first disclosure,” said Sandy Wheeler, a director with PricewaterhouseCoopers L.L.P. in Washington.

The new Labor Department rules are intended to improve disclosure of fees and expenses for investments in participant-directed individual account plans, such as 401(k)s. The agency estimates there are 483,000 such plans.

Comparative chart mandated

The centerpiece of the regulations is a 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if the value of investments fall under a certain dollar amount and the charges that some funds impose on amounts withdrawn before maturity.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. The Labor Department said the first report with that information will have to be provided by May 15, 2012.

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