The DOL released a final rule on October 14, 2010 to improve the transparency of fees and expenses paid by participants in self-directed employer sponsored retirement plans. The overall goals of the regulation were to provide participants with an “apples-to-apples” comparison of their plan’s investment options. Disclosures must provide:
√ Plan-Related Information
√ Investment-Related Information
√ Comparative Format Requirement
Plan-Related Information
Must be provided on or before participants can direct the investment of their accounts and annually thereafter.
General Plan Information
- Directions on how participants can provide investment instructions
- A current list of investment alternatives for the plan
Administrative Expenses
These fees are charged directly to plan participant accounts and should be disclosed two ways.
- The presence of the fees should be described in the annual disclosure, and
- The exact amount deducted must be disclosed as a dollar amount on a quarterly basis.
- Legal
- Accounting
- Recordkeeping
- Investment Advisory
Individual Expenses
These fee are charged directly to plan participant accounts and should be disclosed two ways.
- The presence of the fees should be described in the annual disclosure, and
- The exact amount deducted must be disclosed as a dollar amount on a quarterly basis.
- Fees for loans, QDROs, Brokerage window, redemption fees, etc.
Statements of Actual Charges or Deductions – Participants must receive statements, at least quarterly, showing the dollar amount of the plan-related fees and expenses actually charged to or deducted from their individual accounts, along with a description on the service for which the charge or deduction was made.
Investment-Related Information
Must be provided on or before participants can direct the investment of their accounts and annually thereafter.
Performance Data
- 1, 5, and 10 year performance for each alternative ending on the most recently completed calendar year
Benchmark Information
- A Benchmark must be provided for each investment alternative
- Benchmark cannot be administered by an affiliate of the investment provider, advisor, or principal underwriter
- Name and 1, 5, and 10 year performance of a broad-based securities market index benchmark for each alternative
Fees and Expense Information
The Total Annual Operating Expense must be disclosed as a percentage of assets, as well as a dollar amount for each $1,000 invested. Shareholder-type fees or restrictions on the participant’s ability to purchase or withdraw from the investment
Required Investment-Related Disclosures
- Website address and Plan Administrator Contact for more information
- Past performance does not guarantee how the investment will perform in the future
- Your investment options could lose money
- Fees and expenses are only one of the many factors to consider when determining to invest in an option
- Fees and Expenses can substantially reduce the growth of your retirement savings.
Website Requirements
- Name of alternative’s issuer
- Information consistent in form with the SEC’s Form N-1A or N-3, as appropriate
- Types of assets comprising the investment’s portfolio (top 10 holdings)
- Objectives
- Principal strategies and principal risks
- Portfolio turnover rate
- Performance data updated on at least a quarterly basis
