Ask the experts: (b)Lines

(b)lines Ask the Experts – Participant Disclosure for Provider’s Entire Platform

May 22, 2012 (PLANSPONSOR (b)lines) – “I am a 403(b) plan sponsor with three active investment providers.

By PS | May 22, 2012
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“One provider offers about 20 investments, but the other two are large mutual fund providers who offer their entire suite of proprietary mutual funds to our plan participants. Each mutual fund array exceeds 100 investments, though many of the funds contain little in the way of participant assets. Since participants in our plan are free to choose among the three vendors in our plan, must the participant disclosure include the hundreds of investments that are available to our participants? If so, the disclosure will run into the tens of pages, and will be an expensive proposition to deliver to all of our participants.”  

Michael A. Webb, Vice President, Retirement Services, Cammack LaRhette Consulting, answers:  

The short answer is, no, it may not be necessary to provide the require disclosure for all the investments in your plan; however, there is a larger fiduciary concern with the approach you are taking to manage your participant investments that the Experts should address as well.  

Fortunately, the DOL recently released FAB 2012-02 (see "Fee Disclosure Guidance Provides 403(b) Comfort") which addresses both issues. In Q&A #30 of the FAB, the DOL states that the required disclosure information must be provided for all "designated investment alternatives" under a plan. However, strictly as a matter of enforcement of the final fee disclosure regulation, the DOL will not require that ALL of the investment alternatives in a plan with more than 25 investments be treated as "designated investment alternatives" (and thus be required to disclose specific investment information) if the plan administrator:  

  • makes the required disclosures for at least three of the investment alternatives on the platform that collectively meet the "broad range" requirements in the ERISA 404(c) regulation, 29 CFR § 2550.404c-1(b)(3)(i)(B); and  
  • makes the required disclosures with respect to all other investment alternatives on the platform in which at least five participants and beneficiaries, or, in the case of a plan with more than 500 participants and beneficiaries, at least one percent of all participants and beneficiaries, are invested on a date that is not more than 90 days preceding each annual disclosure.