In a rule published on March 19, 2015, the Department of Labor (“DOL”) indicated that a year can last 14 months, at least when it comes to the disclosure of fees, expenses and other investment-related information by participant-directed individual account plans, such as 401(k) plans. That rule is based on comments (complaints?) about the requirement under the applicable regulations to provide that information to participants “at least annually.” The DOL initially defined that phrase in the regulations so as to require disclosure of investment-related information at least once every 12 months, and subsequently indicated that each disclosure had to be furnished within 365 days of the prior disclosure. The DOL originally took that rather rigid position to prevent inconsistencies, delays and possible manipulation in the timing of annual fee disclosures. For example, if the DOL had said the disclosures had to be provided “once per plan year” then one disclosure could, theoretically, be provided on December 31 of one year and the following year’s disclosure could be provided on January 2, which would be of little help to participants (and might cause the record keeper to quit). However, the DOL also recognized that the fixed annual deadline in the original rule could create administrative difficulties, such as a constantly creeping deadline that would get earlier and earlier as time went one (because, for example, an anniversary of the prior year’s disclosure fell on a weekend). Accordingly, the DOL invited comments on how to provide plan administrators with appropriate flexibility while assuring participants were provided investment-related information on a regular and consistent basis.
In response, commenters extolled the virtues of a grace period. A grace period would make it easier to consolidate annual fee disclosures with other participant notices (particularly if enrollment periods or the dates for other mailings change), alleviate the difficulties of tracking deadlines on a plan-by-plan or participant-by-participant basis, avoid concerns about synchronizing the timing of necessary information from investment vendors, encourage the expedited provision of information when possible without accelerating all future deadlines, and permit short delays to accommodate changes in investment options. Basically, it would be puppies, kittens, rainbows, unicorns, and 12b-1 fees. Based on this rosy picture, the DOL is proposing to amend the regulations to provide that “at least annually” means at least once every 14 months. Plan administrators can rely on this now and, unless significant adverse comments (complaints?) are received by the DOL before April 20, the amendment will become permanently effective on June 17. While perhaps a somewhat semantically loose approach, this amendment provides some welcome flexibility in satisfying the annual fee disclosure requirements.