A focus on ERISA §404a-5

Regulatory developments affecting defined contribution plans

This presentation is provided by Vantage Benefits Administrators for informational purposes only, and while every effort is made to ensure the accuracy of its contents, it should not be relied upon as being tax, legal or financial advice. Neither Vantage Benefits Administrators or any of its affiliates, representatives, employees, or agents provides tax, financial or legal advice. The information within reflects events as of September 1, 2012.

AGENDA

An introduction to ERISA §404a-5

How will this benefit participants?

WFG & VBA are here to support you

Why ERISA §404a-5?• DOL’s Goal:

– To create a general awareness of fees in a 401(k) plan– To increase awareness of investment and plan-related

information amongst participants – To encourage employees to enroll and participate

• Participants need information about their plan, its fees and their investment options that is:– Easy to understand– Easy to read– Easy to compare

How does the DOL define “participant”?

• All employees eligible to participate in the plan, including those:– Enrolled– Not enrolled

AND

• Beneficiaries who have the right to direct investments in their accounts

What information do plan sponsors need to provide under §404a-5?

• Plan-related information that includes: – General plan information– Administrative expenses±

– Individual expenses±

±The dollar amount of the fees and expenses deducted from participant’s account and actually charged during the preceding quarter must be disclosed quarterly.

• Investment-related that includes:– Identifying information– Performance– Benchmark– Fees and expenses– Website– Glossary

What does plan-related information include?

Type of information ExampleInvestment Instructions and limitations

•Enrollment and investment direction•Participant website & toll free services•Short term trading policy•Redemptions fees

Investment Alternatives Fund options available under plan

Administrative fees/expenses Legal, accounting, recordkeeping services

Individual fees/expenses Participant-initiated transaction fees, such as loan and withdrawal fees

What is investment-related information?

Type of information Example

Identifying information Name and category of the investment (e.g., money market or balanced fund)

Performance data •1,5 and10-year (or since inception) returns for variable return investments•Term and rate of return for fixed return investments

Benchmark data Compare investment 1, 5, 10-year returns to a recognized, major market index

Fee & Expense information

•The Total Annual Operating Expenses (i.e., Expense Ratio) of each investment option •For each $1,000 invested, reflect fund expenses as $ amount•Shareholder fees and fund restrictions

Glossary of terms Helps assist in understanding plan’s investment options

Website address To access additional information about each investment option

Sample of the §404a-5 model chart

DOL’s model chart: www.dol.gov/ebsa/ participantfeerulemodelchart.doc

When does the initial ERISA §404a-5 notice apply?• §404a-5 is effective for plan years beginning on or after November 1, 2011

• As a result of a transition rule:–The initial notice is not required to be delivered until the later of:

Timing of Initial notice

Application

i. 60 days after the effective date of §408(b)(2)

ii. 60 days after the plan year beginning on or after November 1, 2011

For plans with a calendar year plan year

August 30, 2012

When do quarterly disclosure requirements under ERISA §404a-5 go into effect?

• The first required quarterly information must be provided within 45 days following the end of the quarter in which the initial disclosure was required to be provided.

Timing of first quarterly disclosure

For plans with a calendar year plan year

By November 14, 2012

How often should plan sponsors provide the required §404a-5 information?

FrequencyInformation

disclosedInitially Annually Quarterly 30-90 days in

advance of a change

Plan-related X X XInvestment-related^

X X

Actual administrative and individual charges

X

^There is an ongoing obligation to provide and update certain investment-related information via the Web, and to provide additional information upon request.

DOL’s interim enforcement policy for electronic distribution of §404a-5 disclosures

Plan and investment-related information can be furnished electronically, if certain conditions are met, including:

•Initial Notice to participant and beneficiary, if they voluntarily provide an email address to receive such information

•Annual Notice, thereafter, if evidence of electronic interaction with plan exists

•Plan can ensure electronic delivery protocols, including:– Return receipt– Bounce back monitoring

What is the Plan’s fiduciary responsibility?

• Non-compliance with §404a-5 is a fiduciary breach

• However, plan administrators will not be held liable for any deficiencies in the information furnished by their provider that they reasonably and in good faith relied on.

How to get ready for §404a-5?

Familiarize yourself with the DOL’s Model Comparative Chart

Find out what support you will receive from your service provider

Validate your data source for all eligible employees and beneficiaries

Budget for possible costs associated with delivering the required disclosures

Find out if you can satisfy the conditions for electronic delivery of the required disclosures

Why §404a-5? A recap …

To give eligible employees information about the services and fees associated with their plan to help them better understand their options and make more informed decisions about the management and investment of their retirement account.

Your team is here to support you

Participant-related tools and resources from Vantage Benefits Administrators:Enrollment materials (Bilingual Available)

Quarterly participant statements with fee information (updated to reflect 404a-5 quarterly disclosure requirement)Participant website that includes access to investment information and retirement toolsAccess to experienced, bilingual Customer Service Representatives

§404a-5 resources available to plan sponsors from Vantage Benefits

Important Plan Information (IPI) Template– Can be used to assist with the disclosure of plan-related information

Investment Comparative Chart (ICC)– Can be used to assist with the disclosure of investment-related information

HR website – Will house IPI, ICC and other support materials

Participant Fee Disclosures for Brokerage Windows Final Rules – DOL Reg. § 2550.404a-5

General Plan Information – Initial/Annual Disclosure: Description of any brokerage window that enables participants to select investments other than DIAs. [§ 2550.404a-5(c)(1)(i)(F)] Individual Expenses – Initial/Annual Disclosure: Explanation of any fees and expenses that may be charged against a participant’s account on an individual basis and that are not reflected in total annual operating expenses of DIAs. [§ 2550.404a-5(c)(3)(i)(A)] Individual Expenses – Quarterly Disclosure: Quarterly disclosure if fees and/or expenses are actually charged to account. A description of the services to which the charges relate.

[§ 2550.404a-5(c)(3)(ii)]

Questions?Questions?Questions?