Ask the Experts November 17, 2010

(b)lines Ask the Experts – Fee Disclosure and Annuity Contracts

November 23, 2010 (PLANSPONSOR (b)lines) – Will the new fee disclosure rules for disclosures from service providers to plan fiduciaries and for disclosures to plan participants that are generally scheduled to go into effect in the next 12-18 months apply to frozen group annuity contracts, active individual annuity contracts, or frozen individual contracts within an ERISA 403(b) plan?

Reported by

David Levine, Groom Law Group, answers:

Under the recently issued final rules under ERISA section 408(b)(2) and ERISA section 404(a), ERISA service providers will be required to provide enhanced disclosures to plan fiduciaries and plan fiduciaries will be required to provide enhanced disclosures to ERISA plan participants and beneficiaries. It is not clear whether the relief in DoL Field Assistance Bulletins 2009-2 and 2010-1 that applies to certain frozen plan contracts funding an ERISA 403(b) plan would also apply to these disclosure requirements. As such, to the extent that contracts are not provided relief from ERISA section 408(b)(2) and/or ERISA section 404(a) (which, as noted above, is not specifically provided at this time), compliance with the new disclosure requirements would be required.

Notably, the ERISA section 404(a) guidance provides some limited relief for 403(b) plans in that it allows providers (as would be the case of individual annuity contracts or may be the case with respect to frozen legacy contracts subject to ERISA) to provide their own documents as part of a set of documents satisfying the ERISA section 404(a) disclosure requirements.

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.