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Developments in Employee Benefits & Executive Compensation

Inside Compensation

Developments in Employee Benefits & Executive Compensation

Labor Department Extends Plan Disclosure Deadline

By Amy N. Moore on July 23, 2013
Posted in Defined Contributions Plans

The Labor Department has extended the deadline for section 401(k) plans and other defined contribution plans to provide a comparative chart with information about investment alternatives.  The extension gives plan administrators an opportunity to re-set their disclosure schedules so that they can provide the comparative chart with other recurring disclosures, such as enrollment material or individual benefit statements.

If a plan allows participants to direct the investment of their accounts, a regulation issued in 2010 requires the plan administrator to provide the participants with performance data, expenses, and other information about the plan’s investment alternatives in a comparative format.  The administrator of a calendar-year plan was required to provide the first comparative chart no later than August 30, 2012, and to provide the chart at least annually thereafter.  If the administrator issued the first comparative chart on August 25, 2012, the updated chart would be due on August 25 of each subsequent year.

Plan administrators and service-providers pointed out that this disclosure schedule did not match the timing of any other required disclosures.  They explained that it was expensive and inefficient to deliver the comparative chart in a separate mailing.  They also argued that participants would be more likely to read the chart if they received it with other plan disclosures, such as annual enrollment material.

In response to these points, the Labor Department issued Field Assistance Bulletin 2013-02, which provides temporary enforcement relief from the disclosure deadline.  The Labor Department will not take enforcement action if a plan administrator delivers the comparative chart that otherwise would be due in 2013 no later than 18 months after the previous chart.  For example, if the plan administrator delivered the first comparative chart on August 25, 2012, the plan administrator may deliver the next comparative chart as late as February 25, 2014.  The extension of the deadline gives the plan administrator a one-time opportunity to re-set the annual filing deadline so that the anniversary falls on a date when other plan disclosures are due.

The field assistance bulletin recognizes that a plan administrator might already have provided the comparative chart that was due in 2013, or might be in the process of providing that chart.  The field assistance bulletin gives plan administrators the option of applying the one-time extension of the disclosure deadline to the 2014 chart rather than to the 2013 chart.  For example, if the plan administrator delivers the second comparative chart on August 25, 2013, the administrator may deliver the next comparative chart as late as February 25, 2015.  The bulletin also announces that the Labor Department is considering whether to provide a permanent 30-day or 45-day window for the annual filing deadline, to give plan administrators more flexibility.  The bulletin invites comments on this proposal.

The field assistance bulletin emphasizes that the extension of the deadline is an expression of the Labor Department’s policy for enforcing the disclosure requirement in the 2010 regulation, and that the extension “does not address the rights or obligations of other parties.”  The 2010 regulation takes the position that a plan administrator has a fiduciary duty to ensure that participants receive sufficient information about their investment alternatives to make informed investment decisions.  The regulation provides that a plan administrator will be deemed to have discharged this duty if it satisfies the disclosure requirements in the regulation, including the requirement to provide the comparative chart “at least annually.”

A plan administrator that takes advantage of the enforcement relief in the field assistance bulletin will not fit within this regulatory safe harbor.   In a statement released with the field assistance bulletin, the Assistant Secretary for Employee Benefits Security said that an employer may re-set the deadline for providing the comparative chart “only if the responsible plan fiduciary determines that doing so will benefit the plan’s participants and beneficiaries.”  Accordingly, plan administrators should determine that later disclosure satisfies any general fiduciary duty they might have.

Tags: disclosure, individual account plans, participant-directed investments, section 401(k) plans
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Photo of Amy N. Moore Amy N. Moore

Amy Moore advises public and private companies and tax exempt organizations on a wide range of tax, ERISA, and employment law issues concerning all types of benefit programs.  Ms. Moore counsels some of the world’s largest multinational companies on the design and implementation…

Amy Moore advises public and private companies and tax exempt organizations on a wide range of tax, ERISA, and employment law issues concerning all types of benefit programs.  Ms. Moore counsels some of the world’s largest multinational companies on the design and implementation of innovative benefit strategies, including the restructuring of retirement programs to meet the needs of the modern work force; the use of surplus pension and insurance assets to provide non-traditional benefits; and the establishment of funding and security arrangements for welfare plans and executive compensation.  She represents clients in connection with pension fund investments in private equity funds, hedge funds, group trusts, and derivatives.  She also advises on benefits and compensation issues in acquisitions and divestitures, debt finance, joint ventures, and other corporate transactions.  Ms. Moore represents companies in audits and contested agency proceedings involving benefit plans and advises clients on employee benefits issues that arise in connection with ERISA litigation and settlements.  She also counsels employers on issues of plan administration and the correction of operational problems under government-sponsored remedial programs.

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