Caron Bletzer News

408(b)(2) Fee Disclosures Extended to July 1, 2012

The Department of Labor has finally released the final 408(b)(2) fee disclosure regulations.  As had been hoped for, the fee disclosure reporting deadline for vendors to plan sponsors, discussed previously in our blog, has been extended from April 12, 2012 to July 1, 2012.

The final regulation can be viewed here:

2012 Retirement Plan Limits Were Recently Announced

Finally, cost of living adjustment (COLA) figures have moved enough to cause retirement plan contribution limits to rise after remaining the same for three years in a row.  On October 20, 2011, the IRS announced the new limits for 2012.  The elective deferral (employee contribution) limit increases from $16,500 to $17,000 for 401(k), 403(b) and most 457 plans, and the “catch-up” contribution limit for participants over age 50 in those plans remains unchanged at $5,500.

The §415(c)(1)(A) limit on total contributions to a defined contribution plan was raised from $49,000 to $50,000.

The §415(b)(1)(A) limitation on the annual benefit under a defined benefit pension plan increased from $195,000 to $200,000. 

The dollar threshold for determining “highly compensated employee” status also increased from $110,000 to $115,000, and the annual compensation limit under §401(a)(17) that governs the amount of compensation that may be considered in a defined contribution plan increased from $245,000 to $250,000.

Additionally, phase-out ranges relating to IRA contributions moved somewhat, and the taxable wage base for social security increased from $106,800 to $110,100.  For a full listing of changes, please see COLA Table.

Confusion Over Fee Disclosure Compliance

There are two sets of fee disclosure regulations that were issued by the U.S. Department of Labor Employee Benefits Security Administration (EBSA) in 2010.  This fact, and the movement of compliance deadlines for both sets, has contributed mightily to confusion amongst plan sponsors.  There are new requirements for disclosures to plan sponsors from covered service providers, and requirements for disclosures from plan sponsors to plan participants.  The overarching goal of the new disclosures is to improve transparency, ensure that the fees charged by service providers are reasonable (and thus don’t give rise to prohibited transactions and violations of fiduciary duty) and to provide participants that direct their own investments with the information necessary to make those decisions.

The disclosure requirements are somewhat extensive and won’t be detailed here, but it is worth noting that the extended deadlines are fast approaching.  Plan sponsors will need to obtain the required fee disclosures from covered service providers no later than April 1, 2012.  After that date, the disclosures must be received in advance of entering into new contracts with providers.

Disclosures to defined contribution plan participants will also begin in 2012.  Initial disclosures for new participants joining a plan, and for all participants as implementation phases in, must be ready by May 31, 2012 for a calendar year-end plan.  Quarterly disclosures to participants, which will show expenses paid from their accounts, need to be available by August 1, 2012. 

As this is uncharted territory for many, if not most, plan sponsors, we recommend that you be speaking to your service providers now about the information they are going to provide to you, and the assistance that they will offer in providing appropriate disclosures to participants.  You should come away from these conversations with a clear conviction that the service provider understands the new regulations and is prepared to adequately address them, and assist you in doing so.  As a fiduciary, you will have responsibility to receive and evaluate fee information, and make adequate disclosures to participants.  You will want to be sure that you are getting all the information you need to meet these fiduciary responsibilities.

Links to DOL Regulations:

DOL Reg. 2550.408b-2 – Disclosures to Plan Sponsors

DOL Reg. 2550.405a-5 – Fee Disclosures to Participants

2011 Retirement Plan Limits Announced

For the third year in a row, retirement plan contribution limits tied to cost of living adjustment (COLA) figures remain unchanged, the IRS has announced.  This means the maximum employee deferral contribution limit for 401(k) and 403(b) plans stays at $16,500 for 2011, with “catch-up” contributions for employees over age 50 remaining at $5,500.  Other figures, including the annual additions limitations, compensation limits for purposes of determining highly compensated or key employee status, and the social security wage base also remain unchanged.

Jeff Polchlopek Joins the Partnership

We are pleased to announce that Jeff Polchlopek, who has been with the firm for over 10 years, was promoted to partner at Caron & Bletzer, PLLC.

Jeff is an audit partner in the ERISA practice, and runs many of the firm’s more complex employee benefit audits. His practice has a particular emphasis on clients with 11K filing requirements, defined benefit pension plans, multiple employer plans and employee stock option plans. Prior to joining the firm, Jeff worked in the retirement plan industry in the private sector. Over the years, Jeff’s technical knowledge, attention to detail and extraordinary client service focus have been great contributors to the firm’s growth in its niche area of employee benefit plan audits.