Compliance

DOL’s Answer in Fee Disclosure Guidance “Surprising”

By Corie Russell editors@plansponsor.com | May 24, 2012
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May 24, 2012 (PLANSPONSOR.com) - When reading Field Assistance Bulletin 2012-02, relating to participant fee disclosures, some industry experts are particularly surprised by the Department of Labor’s (DOL) response to Question 30.

The DOL’s Employee Benefits Security Administration (EBSA) recently issued frequently asked questions about the requirements of new participant fee disclosure rules. The bulletin answers questions about what types of plans are covered under the regulation and addresses methods of disclosing plan-related information and how to deal with revenue sharing (see “DOL Issues Additional Guidance for Participant Fee Disclosures”).   

Question 30 asks whether an investment platform offered by a retirement plan is considered a designated investment alternative when the platform includes many registered mutual funds of multiple fund families to which participants and beneficiaries may direct the investment of assets held in or contributed to their individual accounts. It adds that although the plan fiduciary selected the platform provider, the fiduciary did not designate any of the funds on the platform as “designated investment alternatives” under the plan.   

The DOL responded by saying that although the regulation does not specifically require a plan to have a particular number of designated investment alternatives, the failure to designate a manageable number of investment alternatives raises questions as to whether the plan fiduciary has satisfied its obligations under section 404 of the Employee Retirement Income Security Act (ERISA).  

“So the DOL is throwing down the gauntlet here,” Fred Reish, chairman of the financial services ERISA team at Drinker Biddle & Reath LLP, told PLANSPONSOR.