Friday, October 15, 2010

Ding, Dong the prospectus requirement is finally dead, dead, dead!!! - Participant Disclosure Regs

The DOL just published the final regulation on participant disclosures, completing a process started several years ago with a three part regulatory initiative to improve transparency:

1. New disclosures required on Schedules A and C of the Form 5500, effective in 2009

2. 408b-2 point of sale disclosures, published recently and effective July 16, 2011

3. Participant disclosure rule, effective sixty days from today, but with disclosure requirements that don’t kick in until plan years beginning after November 1, 2011 (2012 for most plans).

The rule is a “final” regulation, and appears to track the Bush administration’s version closely. One key element: the Bush administration decision to eliminate the 404(c) prospectus requirement survived the final regulation. No more “forced” prospectus requirement. Good riddance. Fiduciaries will still need to provide prospectuses on demand, but that’s easy.

What does this new rule mean to advisors? Not much. The real burden will be on plan providers like Unified Trust, who will need to retool systems to deliver information in the prescribed format. It’s worth noting, also, that the basic nature of this rule is that it puts the burden of compliance on plan fiduciaries, not providers: DOL interpreted ERISA Section 404(a), the Fiduciary Duties, especially the prudence and exclusive purpose rules, as requiring disclosure to participants. Realistically, however, the burden is on providers, and there are provisions allowing sponsors to rely on data providers give them.

Here’s a link to the DOL website, where you can download the full regulation and the Fact Sheet: Stay tuned for more info on what it means to you, your clients, and your business.

- Original Content credit to Pete Swisher, Unified Trust Company.