In a letter to the Department of Labor’s (DOL) Employee Benefit Security Administration (EBSA), Craig P. Hoffman, general counsel and director of Regulatory Affairs at ASPPA, said ASPPA is concerned about the potential for unnecessary costs and increased administrative burdens associated with the “second round” of annual disclosures required under the participant level fee disclosure regulation.
Hoffman noted that the initial disclosure deadline was originally tied to the start of a plan year. However, it was extended to coincide with the effective date of the related 408(b)(2) regulation. The result is that most plans had until August 30, 2012, to make the “first round” of participant disclosures. This means the ‘second round’, which is due under the regulation annually after the initial disclosure, would seemingly need to be made by August 30, 2013.
“Unfortunately, the extension of the ‘first round’ deadline has not only created an arbitrary August deadline for 2013’s ‘second round’ of notices, but also for all future ‘rounds’ of annual participant disclosures. For most plans, particularly those that operate on a calendar year basis, an annual August deadline has no correlation to the timing of any other disclosures that the plan may be required to make. Therefore, the cost of the annual disclosure becomes a stand-alone expense, rather than enabling the plan administrator to combine it with other required plan disclosures. This is uneconomical for these plans and an unnecessary expense,” Hoffman wrote.
ASPPA recommends that the DOL provide for a one-time transitional realignment period during which plan administrators may choose to issue the ‘second round’ of annual participant disclosures no later than 2 ½ months after the start of the first plan year beginning on or after November 1, 2013. Additionally, the regulatory definition of ‘at least annually’ should be clarified to permit the annual notice to be distributed anytime during a calendar year as long as it is within 18 months of the distribution date of the preceding notice.
“We believe adoption of this recommendation will result in a reduction in administrative costs and an improvement in participant communications without diminishing the importance or visibility of the [Employee Retirement Income Security Act (ERISA) Section] 404(a)5 disclosures, all to the benefit of plan participants and plan professionals alike,” Hoffman said.ASPPA’s comment letter is here.
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