[Federal Register Volume 76, Number 105 (Wednesday, June 1, 2011)]
[Proposed Rules]
[Pages 31544-31545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-13516]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2550
RIN 1210-AB08
Requirements for Fee Disclosure to Plan Fiduciaries and
Participants--Applicability Dates
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed extension of applicability dates.
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SUMMARY: This document proposes to extend specified applicability dates
of the Department's interim final rule concerning fiduciary-level fee
disclosure (29 CFR 2550.408b-2(c), RIN 1210-AB08) and final rule
concerning participant-level fee disclosure (29 CFR 2550.404a-5, RIN
1210-AB07). These rules were published in the Federal Register on July
16, 2010 and October 20, 2010, respectively. Extending these dates will
more closely align the application of the two rules and ensure that
parties have sufficient time to comply with the requirements of the
rules.
DATES: Comments on the proposal to extend the applicability dates for
the Department's fee disclosure rules should be submitted to the
Department on or before June 15, 2011.
FOR FURTHER INFORMATION CONTACT: Michael Del Conte, Office of
Regulations and Interpretations, Employee Benefits Security
Administration, (202) 693-8500. This is not a toll-free number.
ADDRESSES: To facilitate the receipt and processing of comments, EBSA
encourages interested persons to submit their comments electronically
to [email protected], or by using the Federal eRulemaking portal http://www.regulations.gov (following instructions for submission of
comments). Persons submitting comments electronically are encouraged
not to submit paper copies. Persons interested in submitting comments
on paper should send or deliver their comments (preferably three
copies) to: Office of Regulations and Interpretations, Employee
Benefits Security Administration, Room N-5655, U.S. Department of
Labor, 200 Constitution Avenue, NW., Washington, DC 20210, Attention:
Fee Disclosure Applicability. All comments will be available to the
public, without charge, online at http://www.regulations.gov and http://www.dol.gov/ebsa, and at the Public Disclosure Room, Employee Benefits
Security Administration, U.S. Department of Labor, Room N-1513, 200
Constitution Avenue, NW., Washington, DC 20210.
SUPPLEMENTARY INFORMATION: On July 16, 2010, the Department published
in the Federal Register an interim final rule enhancing required
disclosure from certain pension plan service providers to plan
fiduciaries as part of a ``reasonable'' contract or arrangement for
services under ERISA section 408(b)(2) (75 FR 41600) (the ``408(b)(2)
regulation''). 29 CFR 2550.408b-2(c). The Department subsequently
published in the Federal Register, on October 20, 2010, a final rule
concerning the disclosure of plan fee and expense information by plan
administrators to plan participants and beneficiaries (75 FR 64910)
(the ``participant-level disclosure regulation''). 29 CFR 2550.404a-5.
The participant-level disclosure regulation includes modifications to
the disclosure requirements in the Department's regulation under ERISA
section 404(c), at 29 CFR 2550.404c-1 (the ``404(c) regulation''), in
order to avoid duplication and integrate its requirements with those of
the new participant-level disclosure regulation.\1\
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\1\ The amendments to the Department's 404(c) regulation apply
for plan years beginning on or after November 1, 2011. The proposals
contained in this document would have no effect on the applicability
of these amendments.
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Unless extended, the effective date for the interim final 408(b)(2)
regulation will be on July 16, 2011 as to both new, and pre-existing,
contracts or arrangements between covered plans and covered service
providers. The Department has received many requests that this
effective date be extended. A significant number of parties have argued
that more time is essential to update systems and procedures for
information collection and disclosure. Pointing out that the Department
has not yet published a final rule, parties have explained that, if the
Department modifies the current interim final rule, service providers
will need additional time to make further changes. Based on these
concerns, the Department believes that an extension of the rule's
effective date would lead to fuller and timelier compliance by plans
and service providers, and thus would be in the interests of
participants and beneficiaries. Moreover, as discussed below, an
extension will enable the Department to align the effective date for
this regulation with the applicability date of the participant-level
disclosure regulation. Accordingly, in February 2011, the Department
announced its intention to extend the 408(b)(2) regulation's effective
date until January 1, 2012.\2\ The Department has not received any
negative comments on this announcement. The amendments proposed in this
notice, if finalized, would effectuate this announcement.
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\2\ See http://www.dol.gov/ebsa/newsroom/2011/ebsa021111.html.
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Although the final participant-level disclosure regulation was
effective on December 20, 2010, its requirements only begin to apply
for plan years beginning on or after November 1, 2011. The regulation
also includes a transitional rule, in paragraph (j)(3)(i), for
furnishing disclosures required on or before the date on which a
participant or beneficiary can first direct his or her investment. For
participants or beneficiaries who, as of their plan's applicability
date, had the right to direct the investment of their individual
accounts, the plan must furnish these initial disclosures no later than
60 days after the applicability date. As with the 408(b)(2) regulation,
the Department has continued to receive requests that additional time
be provided in order for parties to comply. Further, because the
Department announced its intention to extend the 408(b)(2) regulation's
effective date to January 1, 2012, parties argue that it would be
preferable to extend application of the participant-level disclosure
regulation until after the effective date of the 408(b)(2) regulation.
Specifically, these parties point to the provision in the 408(b)(2)
interim final regulation which requires
[[Page 31545]]
covered service providers to furnish information requested by a
responsible plan fiduciary or plan administrator in order to comply
with ERISA's reporting and disclosure requirements,\3\ which would
include relevant information required to comply with the participant-
level disclosure regulation. It would facilitate compliance with the
participant-level disclosure regulation, they argue, if contracts and
arrangements were brought into compliance with the 408(b)(2)
regulation, so that this reporting and disclosure provision is in
effect, prior to the applicability of the participant-level disclosure
regulation.
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\3\ 29 CFR 2550.408b-2(c)(1)(vi).
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The Department agrees that aligning the application of these two
regulations would assist plan fiduciaries and plan administrators in
obtaining information required to comply with the participant-level
disclosure regulation. Further, the Department believes that, similar
to the 408(b)(2) regulation, a limited extension is in the best
interests of covered individual account plans and their participants
and beneficiaries. Delayed application will better afford plans
sufficient time to ensure an efficient and effective implementation of
the participant-level disclosure regulation. To accomplish this end,
the Department does not believe it is necessary to extend the
regulation's effective date or its general application to plan years
beginning on or after November 1, 2011. However, the Department
proposes to extend the transition rule in paragraph (j)(3)(i), which
specifies the date by which initial disclosures must actually be
provided. Under this proposal, a plan would have 120 days (rather than
60) after its applicability date to furnish the initial disclosures
that are otherwise required to be furnished before the date on which a
participant or beneficiary can first direct his or her investments.
Thus, a calendar year plan would have to furnish the initial
disclosures no later than April 30, 2012, and the disclosures required
by paragraphs (c)(2)(ii) and (c)(3)(ii) (e.g., quarterly statement of
fees/expenses actually deducted) would have to be furnished no later
than May 15, 2012. Under the proposed transition rule, the initial
disclosures must be provided to all participants and beneficiaries who
have the right to direct their investments when such disclosures are
furnished, not just to those individuals who had the right to direct
their investments on the applicability date. This is to ensure that
individuals who become plan participants in between the applicability
date and the end of the 120-day period receive the important
information required under the regulation. To the extent the plan also
has contracts or arrangements with covered service providers, as
defined by the 408(b)(2) regulation, those contracts or arrangements
must be in compliance with the 408(b)(2) regulation as of January 1,
2012, in advance of the required initial disclosures under the
participant-level disclosure regulation.
The Department has not been persuaded to extend the application of
the participant-level disclosure regulation, or the 408(b)(2)
regulation, beyond these dates. Although the Department believes it is
appropriate to provide some relief to help ensure a timely, efficient,
and coordinated implementation of the two rules, the Department also
believes that it is critical for responsible plan fiduciaries, plan
administrators, and plan participants and beneficiaries to benefit from
the increased transparency provided by the rules as soon as possible.
At this time, the Department solicits comments on this proposal to
formally extend the effective date of the 408(b)(2) regulation and the
transitional rule for application of the participant-level disclosure
regulation.
List of Subjects in 29 CFR Part 2550
Employee benefit plans, Exemptions, Fiduciaries, Investments,
Pensions, Prohibited transactions, Real estate, Securities, Surety
bonds, Trusts and Trustees.
For the reasons set forth in the preamble, the Department of Labor
proposes to amend 29 CFR part 2550 as follows:
PART 2550--RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY
1. The authority citation for part 2550 continues to read as
follows:
Authority: 29 U.S.C. 1135, sec. 102, Reorganization Plan No. 4
of 1978, 5 U.S.C. App. 1 and Secretary of Labor's Order No. 6-2009,
74 FR 21524 (May 7, 2009). Sec. 2550.401c-1 also issued under 29
U.S.C. 1101. Sec. 2550.404a-2 also issued under sec. 657, Pub. L.
107-16, 115 Stat. 38. Sections 2550.404c-1 and 2550.404c-5 also
issued under 29 U.S.C. 1104. Sec. 2550.408b-1 also issued under 29
U.S.C. 1108(b)(1). Sec. 2550.408b-19 also issued under sec. 611,
Pub. L. 109-280, 120 Stat. 780, 972. Sec. 2550.412-1 also issued
under 29 U.S.C. 1112.
2. Section 2550.404a-5 is amended by revising paragraph (j)(3)(i)
to read as follows:
Sec. 2550.404a-5 Fiduciary requirements for disclosure in
participant-directed individual account plans.
* * * * *
(j) * * *
(3) Transitional rules.
(i) Notwithstanding paragraphs (b), (c) and (d) of this section,
the initial disclosures required on or before the date on which a
participant or beneficiary can first direct his or her investments must
be furnished no later than 120 days after such applicability date.
* * * * *
3. Section 2550.408b-2 is amended, in paragraph (c)(1)(xii), by
removing the date ``July 16, 2011'' and adding in its place ``January
1, 2012''.
Signed at Washington, DC, this 26th day of May, 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
[FR Doc. 2011-13516 Filed 5-31-11; 8:45 am]
BILLING CODE 4510-29-P