Update to Annual 404a-5 Participant Disclosure Requirements

Since 2012, the Department of Labor has required that employers sponsoring employee-directed retirement plans provide participants with disclosures containing detailed information about the plan and its investments. These disclosures must be provided to participants before they can first direct their accounts and then on an annual basis after that. Until recently, the annual disclosure requirement meant that participants had to be provided with the disclosures once in every 12-month period. Under this requirement, employers had to keep track of the date that they last provided the disclosure and make sure that the next disclosure was provided within 12 months of that date. Unfortunately, if the employer provided the disclosure before the end of the 12-month period one year, it would cause the deadline for the following year to shift forward to that date. This continual shifting of the next year’s deadline would, over time, lead to “deadline creep” as the deadline would move earlier and earlier each year.

The Department of Labor, in recognition of the deadline creep problem created by the 12-month requirement, has introduced new guidance that created a two month grace period. Under this new guidance, the disclosures now must be provided once in every 14-month period. The remaining provisions of the 404a-5 participant disclosure rules remain unchanged.

In most cases, the plan’s recordkeeper/investment provider will prepare the participant disclosures on the employer’s behalf. The timing for providing updates to the disclosures varies from recorkeeper to recordkeeper. Employers should follow the instructions provided by the plan’s recordkeeper to ensure that the disclosures are up to date. In some cases, TSC provides a Plan Information Statement which is designed to supplement the disclosures provided by the plan’s recordkeeper. TSC sends a reminder to those clients a few months prior to the start of each plan year.

Juhl Stoesz, Associate Counsel