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Participant Fee Disclosures in Employer-Sponsored Retirement Plans

Participant Fee Disclosures in Employer-Sponsored Retirement Plans. March 2012. Participant Fee Disclosure. Background In February 2012, the Department of Labor published final regulations related to fee disclosures to participants in many ERISA-governed retirement plans.

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Participant Fee Disclosures in Employer-Sponsored Retirement Plans

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  1. Participant Fee Disclosuresin Employer-SponsoredRetirement Plans March 2012

  2. Participant Fee Disclosure Background • In February 2012, the Department of Labor published final regulations related to fee disclosures to participants in many ERISA-governed retirement plans. • At times, these are referred to as “404(a)(5) Disclosures” • Although called fee disclosure regulations, the required disclosures go far beyond information on fees alone • All participant-directed ERISA plans must comply with the new regulations. • Deadline for compliance is August 30, 2012. • Failure to comply can result in significant penalties, including the potential disqualification of the plan. • IMPORTANT: Compliance with the new regulation is a fiduciary responsibility, not a service provider responsibility. © 2012 Verisight, Inc.

  3. Participant Fee Disclosure What is the goal of 404(a)(5) Regulations? • Providing participants in participant directed ERISA plans with more information regarding the fees, expenses, costs, and certain investment information associated with their directed investment options in those plans. © 2012 Verisight, Inc.

  4. Participant Fee Disclosure Who is the notice provider? • The Plan Administrator (typically this is the Plan Sponsor) is responsible for preparing and delivering the required participant fee disclosures. • Plan sponsors may rely on their plan’s service providers, recordkeepers and investment advisors, to provide the required information to their participants. • Verisight will support clients with a solution to comply with the regulations. © 2012 Verisight, Inc.

  5. Participant Fee Disclosure Who must receive the notices? • Each eligible participant must be furnished with the required disclosures even if he/she has not yet enrolled in the plan. • Any participant with a balance in the plan. • Any eligible employee that is not yet participating. • Any beneficiary that has the right to direct investments within the plan. © 2012 Verisight, Inc.

  6. Participant Fee Disclosure What must be disclosed? • Plan-related information: • Investment instructions and limitations • Investment alternatives • Administrative fees/expenses • Individual fees/expenses • And… © 2012 Verisight, Inc.

  7. Participant Fee Disclosure What must be disclosed? • Investment-related information: • Identifying information about each investment option • Performance data • Benchmark information • Fee and expense information • Glossary of terms • Website address for additional information © 2012 Verisight, Inc.

  8. Participant Fee Disclosure When is the deadline to start providing disclosures? • The initial disclosure must be provided on or before August 30, 2012. The first quarterly disclosure must be provided by November 14, 2012 (with information for the third quarter). © 2012 Verisight, Inc.

  9. Participant Fee Disclosure When must disclosures be provided on an ongoing basis? • Plan- and investment-related information: on or before the first date participants and beneficiaries can direct their investments and annually thereafter • Administrative and individual expenses actually charged to a participant’s account: quarterly • Changes to plan-related information: 30 to 90 days in advance © 2012 Verisight, Inc.

  10. Participant Fee Disclosure In summary, there are essentially four different disclosure requirements: • A “New Participant” disclosure • An annual disclosure • A quarterly disclosure • An “Investment or Fee Change” disclosure © 2012 Verisight, Inc.

  11. Participant Fee Disclosure What are the required disclosures? • New Participant Disclosure • On or before first contribution • All newly eligible participants • Plan-related fee information • Investment-related information • Comparative chart on plan investments © 2012 Verisight, Inc.

  12. Participant Fee Disclosure What are the required disclosures? • Annual Disclosure • To all eligible participants • Specific fee information • Investment-related information • Comparative chart on plan investments © 2012 Verisight, Inc.

  13. Participant Fee Disclosure What are the required disclosures? • Investment Changes and Fee Changes • Between 30-90 days prior to fund and fee changes • All eligible participants • Outlining any changes to investments (fund changes, fund additions, fund name and ticker symbol changes, etc.) and any changes to fees (administrative fee changes, distribution fee changes, etc.) © 2012 Verisight, Inc.

  14. Participant Fee Disclosure What are the required disclosures? • Quarterly Disclosure • To participants charged a fee during the prior quarter • Specific dollar amount • General description of fees © 2012 Verisight, Inc.

  15. Participant Fee Disclosure How must the disclosure notices be provided? • Electronic delivery is acceptable for eligible employees that meet one of two criteria: • Have specifically opted to receive plan notices electronically; or • Have access to an electronic delivery system (generally, an email system) used to deliver the notices and use the system as an integral part of their job • Otherwise, hard copies of the notices must be mailed out to any participant eligible to receive the notice. © 2012 Verisight, Inc.

  16. Participant Fee Disclosure Summary of disclosure services Verisight will provide to clients in our bundled service model: • New Participant Disclosure • A Participant Disclosure Document (PDD) will be provided with enrollment materials. • Annual Disclosure • A Participant Disclosure Document (PDD) which includes website address information for each investment option and the required glossary of financial terms • Quarterly Disclosure • A new lengthier participant quarterly statement. • All participants will have the option to opt for hard copy or online statements • Change Notice Disclosure • A Participant Disclosure Document (PDD) will be provided whenever a material change is made to the plan. © 2012 Verisight, Inc.

  17. Participant Fee Disclosure Sample New Participant, Annual, and Change Disclosure: © 2012 Verisight, Inc.

  18. Participant Fee Disclosure Sample Quarterly Disclosure: © 2012 Verisight, Inc.

  19. Participant Fee Disclosure Next Steps: • Verisight will provide additional information as the deadline approaches • Verisight will be contacting clients with a questionnaire to capture information about other fees being passed through to the plan that must be disclosed. Examples of these are: • Audit fees • Legal fees • Consulting fees • Advisory fees • Verisight will be contacting clients to discuss disclosure delivery options • If necessary, Verisight will interface with plan advisors regarding disclosures necessary for any “nonstandard” assets or portfolios offered as a designated investment option © 2012 Verisight, Inc.

  20. Questions?xxxx@VerisightGroup.com © 2012 Verisight, Inc.

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