401(k) Benefit Statement – Fee Disclosure

401(k) plans that grant participants and beneficiaries the right to direct their investments (in other words, ERISA 404(c) plans) are required to furnish pension benefit statements at least once each calendar quarter. This statement is usually known as an “individual benefit statement” (IBS).

Compare this requirement with the requirement for non-ERISA 404(c) plans to provide annual benefit statements.

IBS

The IBS generally must show the following information:

• The total plan benefits earned by a participant;
• The total vested benefits earned by the participant;
• The value of each investment in the participant’s account;
• Information describing the ability to direct investments under the plan;
• An explanation of the importance of a diversified portfolio; and
• Direction to the DOL’s website for investment information.

• PRACTICE NOTE: The IBS requirement is often combined with the quarterly DOL fee disclosure notice, which has been required by final DOL Regulations since 2012.
  • Plan sponsors are well advised to have the fee disclosure portions in particular reviewed by legal counsel to confirm that they meet all DOL requirements.
  • Please note there is also an annual fee disclosure notice requirement.

Fee Disclosure

The quarterly fee disclosure portion of the notice must show:

• The dollar amount actually charged to the participant’s account during the preceding quarter (for both administrative and individual expenses); and
• A description of the services for which the fees were charged.

The plan must also disclose quarterly, if applicable, that some plan administrative expenses may be paid from the total annual operating expenses of one or more of the plan’s investment options through:

• Revenue sharing arrangements;
• 12b-1 fees;
• Sub-transfer agent fees; or
• Similar arrangements

Penalties

$31 penalty for failure to furnish pension benefit statements to certain former participants and beneficiaries or maintain records.