US Labor Department, Securities and Exchange Commission coordinate on 401(k) plan fee disclosure rules

WASHINGTON — The U.S. Department of Labor's Employee Benefits Security Administration has released a Securities and Exchange Commission staff no-action letter relating to EBSA's participant-level fee disclosure regulation and Rule 482 under the Securities Act of 1933. The letter states that information required by and that complies with the fee disclosure regulation that is provided by a plan administrator, or designee, to plan participants or beneficiaries will be treated as a communication that satisfies the requirements of Rule 482.

The letter's intent is to resolve concerns about potential differences between the department's participant disclosure requirements and the SEC rules on advertising that may apply to plan investment options.

"This no-action letter is significant for many reasons, but primarily because it will help 401(k) plans and service providers understand what is expected of them under the Employee Retirement Income Security Act and the advertising rules under securities law," said EBSA Assistant Secretary Phyllis C. Borzi. "This ultimately will reduce the cost of regulatory compliance for these plans, which will benefit America's workers. This letter exemplifies the close and sustained coordination between our agency and the SEC, not only on this letter, but on many other matters affecting retirement plans and their financial service providers."

On Oct. 20, 2010, EBSA published the participant-level fee disclosure regulation. It requires many retirement savings plans, such as 401(k) plans, to disclose information about the plan's investment alternatives. This includes fee and performance information, which must be provided to participants and beneficiaries in cases where they have the ability to direct the investment of their individual accounts. Most plans will be required to furnish the first set of disclosures under this regulation by May 31, 2012.

EBSA and SEC staff have been coordinating on the no-action letter since pre-publication of the final rule in 2010 to address concerns raised by plan representatives and their financial service providers regarding their obligations under ERISA and Rule 482. Those efforts culminated in the Oct. 26, 2011, no-action letter from the SEC's Office of the Chief Counsel, Division of Investment Management.

EBSA's request and the SEC response can be viewed at http://www.dol.gov/ebsa/.