Participant Fee Disclosures

I recently took over a plan that was begun in 2024 in UGH!!  brokerage accounts.  It is moving to a platform in 2026.  They are asking about "when was the last "annual participant fee disclosure notice" sent to the participants.   I have no idea, but not sure how one prepares that when all participants are in separate brokerage accounts and the broker is not helpful at all.  (Fidelity brokerage for reference).  Any feedback or suggestions appreciated. 

If you’re asking about a 404a-5 disclosure (and someone assumes the plan’s administrator chose to follow that interpretation):

Even when a plan has no designated investment alternative, the administrator might have plan-related information to disclose (if not sufficiently explained in the summary plan description).

See 29 C.F.R. § 2550.404a-5(c)(1)(i)(A)-(B)-(F), -5(c)(2)-(4) https://www.ecfr.gov/current/title-29/part-2550/section-2550.404a-5#p-2550.404a-5(c).

Or, if the truth is that the plan’s administrator never delivered a 404a-5 disclosure, the administrator might tell the new platform that truth.

A service change might be an opportunity for a plan’s administrator to begin a disclosure.

This is not advice to anyone.

@Peter Gulia highlights that a plan with all brokerage accounts doesn't have designated investment alternatives so the table of financial information in the 404(a)(5) notice is not applicable, but any fees chargeable to a participant's account (e.g., admin fees, distribution fees, brokerage account fees...) remain disclosable on the notice.

There is no explicit penalty for a failure to issue the 404(a)(5) notice, BUT the DOL can deem the failure to be a breach of fiduciary responsibility by the plan fiduciaries.  (No fiduciary wants to be in that position.)

Send out the notice ASAP once the decision is made confirming the new investment menu, and disclose any fees payable from a participant's account.  This will demonstrate good faith compliance going forward and likely would placate a DOL investigator.

You might also want to review this DOL Field Assistance Bulletin begjnning at question 13 regarding what disclosures are required to be in the 404a-5 notice in regards to the brokerage accounts: 

https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2012-02r

As a related comment. the ERISA Advisory Council conducted fact findings a few years ago to determine whether Brokerage Window Only (BWO) plans introduced fiduciary issues, or could be seen as an attempt by plan sponsor to circumvent the 404(a)(5) disclosure rules. Most witnesses indicated that BWO plans weren't established to avoid disclosures, they were simply a low cost way to offer plan services, typically to smaller, professional services organizations such as law firms and medical practices. But there are some indications that DOL dislikes and discourages BWO plans. See pages 44 - 45 at https://www.dol.gov/sites/dolgov/files/ebsa/pdf_files/2021-understanding-brokerage-windows-in-self-directed-retirement-plans.pdf for more details.

Bottom line is that moving away from a BWO structure is a good idea from a fiduciary perspective and that starting 404(a)(5) disclosures ASAP is recommended. I'm assuming that the new platform is asking about the last prior disclosure due to the annual notice rule, and wants to make the next disclosure as late as possible. If there was no prior disclosure, the sooner the first disclosures go out, the better.