404(a)(5) disclosure notice

We have several 401k plans with Schawb and Fidelity all in brokerage accounts.  Neither prepares the 404(a)(5) disclosure notice.  Should they?  If not Fidelity or Schwab, who would prepare that?  The financial company that set up the accounts?  The TPA?  Someone else?

Thank you

The job falls to the Plan Administrator. Whether they do it themselves or who they choose hire to do it is up to them.

The 404a-5 rule distinguishes plan-related information [paragraph (c)] and investment-related information [paragraph (d)].

If a plan has no designated investment alternative, that might make unnecessary much of the investment-related information.

“The term ‘designated investment alternative’ shall not include ‘brokerage windows,’ ‘self-directed brokerage accounts,’ or similar plan arrangements that enable participants and beneficiaries to select investments beyond those designated by the plan.” 29 C.F.R. § 2550.404a-5(h)(4).

Yet, a 404a-5 disclosure would include:

“[a] description of any ‘brokerage windows,’ ‘self-directed brokerage accounts,’ or similar plan arrangements that enable participants and beneficiaries to select investments beyond those designated by the plan.” 29 C.F.R. 2550.404a-5(c)(1)(i)(F).

“fees for brokerage windows[.]” 29 C.F.R. 2550.404a-5(c)(3)(i)(A).

29 C.F.R. § 2550.404a-5 https://www.ecfr.gov/current/title-29/section-2550.404a-5

Consider whether the plan’s administrator might engage its third-party administrator to provide services to assemble a 404a-5 disclosure that comprises mostly plan-related information.

This is not advice to anyone.

The 404a-5 disclosure also would include other fees that may be charged to the participant such as distribution fees paid to a recordkeeper/TPA.

We are a TPA and have several clients where everyone has a brokerage account.  We prepare a notice for these plans and have found that the language for each plan commonly doesn't change over time.  The plan administrator keeps a copy on hand.  We send a reminder to the plan administrator to send out the notice and they take care of distributing it to participants.  It really is a minor effort.