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DOL Issues Electronic Fee Disclosure Guidance

The Department of Labor’s (“DOL”) new fee disclosure regulations applicable to participant-directed defined contribution plans are effective for plan years beginning after October 31, 2011.  For calendar year plans, the first annual disclosures are due by May 31, 2012, and […]


The Department of Labor’s (“DOL”) new fee disclosure regulations applicable to participant-directed defined contribution plans are effective for plan years beginning after October 31, 2011.  For calendar year plans, the first annual disclosures are due by May 31, 2012, and the first quarterly statement of expenses incurred is due by August 14, 2012.  Many plan sponsors have urged the DOL to issue new guidance pertaining to the electronic disclosure of this information, as the DOL’s existing electronic disclosure rules are often criticized as cumbersome and outdated.

The DOL responded by issuing Technical Release 2011-03.  This temporary guidance provides that certain of the required disclosures, which may be made in connection with the quarterly benefit statements (required under the Pension Protection Act), may continue to be made under either the existing DOL rules or the more liberal IRS electronic delivery rules applicable to those statements.  However, there are certain other disclosures (including the comparative chart of designated investment alternatives) that are not permitted to be made in connection with the quarterly benefit statements.  In order to be confident that electronic distribution of this investment information satisfies DOL requirements, a plan sponsor either must satisfy the DOL’s existing electronic disclosure rules or must satisfy the conditions set forth in Technical Release 2011-03.

This temporary guidance requires an employee to voluntarily provide the plan sponsor with his or her e-mail address in response to a request accompanied by an initial notice, which contains a great deal of information relating to the electronic disclosure.  In addition, the plan sponsor must furnish the participant with a hard copy annual notice containing much of the same information, unless there is evidence that the participant or beneficiary interacted electronically with the plan after the date of the annual notice for the preceding year.  The plan sponsor must also comply with several other standard DOL requirements, including using delivery measures calculated to insure actual receipt, maintaining the participant’s confidentiality, and drafting all notices in a manner calculated to be understood by the average plan participant.  In addition, there is a special transition provision for plan sponsors who already have participants’ e-mails on file.

Although plan sponsors will undoubtedly be thrilled that the DOL is looking at updating its electronic disclosure regulations, the multitude of new requirements in Technical Release 2011-03 may prove to be so burdensome that plan sponsors will not wish to take advantage of this temporary guidance.

If you require any assistance implementing the new fee disclosure regulations, please feel free to contact Lansing Attorney Brian Gallagher at (517) 377-0886 or bgallagher@fraserlawfirm.com or another member of Fraser Trebilcock’s Employee Benefits Practice Group.