Will a recordkeeper deliver its customer’s 404a-5 notice?

[Peter Gulia]

An ERISA rule—29 C.F.R. § 2550.404a-5—calls an administrator of an individual-account retirement plan that provides participant-directed investment (even if no fiduciary seeks ERISA § 404(c) relief) to furnish regularly a disclosure document that meets several requirements specified in the rule.

Although the rule’s command applies to a plan’s administrator, for most plans a recordkeeper or other service provider does the work—not only in delivering the notice but also in assembling the notice’s investment-related information and other disclosures. 

What happens if a plan’s administrator wants the delivery service but not the assembly service?

Imagine that a plan’s sponsor/administrator is unwilling to adopt its recordkeeper’s standard 404a-5 notice.  And using the part the recordkeeper allows its customer to customize won’t fix the problem.  The customer is willing, at its effort and expense, to write its own 404a-5 notice, retrieve and insert the investment information, and deliver to the recordkeeper by a sharp cut-off date two days after each quarter-close, the print-display file of the 404a-5 notice to be delivered.  The page count and other technical points conform to what the recordkeeper does normally.  The plan’s administrator accepts responsibility for its communication, and the sponsor/administrator exonerates and indemnifies the recordkeeper for relying on the administrator’s instruction.

In your experience, does a recordkeeper:

deliver the customer-prepared notice?

refuse to deliver an outside-prepared 404a-5 notice because doing so would be too much disruption to the recordkeeper’s work methods?

Does the response vary with the size of the customer?

If so, how big must a plan be to get this delivery service?

[MoJo]

We do provide a notice to the plan sponsor who may use it, modify it, or whatever.  We will (FOR A FEE) distribute it to participants, but generally, that is an exception.  We haven't been asked, but I would doubt that we would distribute a notice that was not prepared by us....

[Peter Gulia]

MoJo, thank you for this useful information.

Do others offer a service of delivering the 404a-5 notice (whether the service is included in a general fee, or is available for a separate fee)?

If so, can it be a notice not prepared by the provider of the delivery service?

(I'm aware it's an unusual sponsor/administrator that would question the recordkeeper's standard assembly of the 404a-5 notice.)

[austin3515]

I'm sure it depends on the recordkeeper.  They went to great great great expense to automate their systems to send out their fee disclosure.  So that type of arrangement probably does not lend itself to a different notice.

But Principal for example mails notices all at the same time of year, and we can upload whatever notice we want to be included in the package.  The question is, can they suppress their fee disclosure and send just the notices that you upload?  It's possible.  Again its going to be recordkeeper by recordkeeper.  Some recordkeepers only write the notice and its the sponsors responsibility to send it out.

20 recordkeepers, 20 unique answers to this question.

[Peter Gulia]

austin3515, thank you for your excellent information and thinking.

[MoJo]

14 hours ago, austin3515 said:

20 recordkeepers, 20 unique answers to this question.

I think you are underestimating - "should be 20 recordkeepers, 25 unique answers to this question!"

Only partly kidding on this one.  We run "two" separate r/k platforms - and the answers to various questions differ based on which platform we're talking about....

[Peter Gulia]

Thanks again.

That’s true not only about services offered but also legal positions.  A business organization might, across its subsidiaries, have three or more answers—with differences that cannot be explained away—on the same question of law.  Even within one subsidiary, there might be differing answers by several lines of business.