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DOL Withdraws Controversial Guidance on Participant-Level Disclosures in 401(k) Plans with Brokerage Windows
By: Jason Lacey

The Department of Labor has withdrawn the controversial "Q&A-30" in Field Assistance Bulletin 2012-02, which would have required some investment-specific disclosures regarding fees and expenses in 401(k) plans that offered only a brokerage window, self-directed brokerage account, or similar arrangement and did not designate any specific investment options beyond the brokerage platform. In an amended bulletin (Field Assistance Bulletin 2012-02R), the DOL replaced Q&A-30 with a new Q&A-39 that does not require any investment-specific disclosures in brokerage-window-only plans, but does contain strong language warning plan fiduciaries that merely offering a brokerage window to participants may not be fully consistent with the general fiduciary obligations imposed by ERISA.

As brief background, the DOL's participant-level fee-disclosure regulation (which goes into effect this year) requires specific annual and quarterly disclosures to participants in most participant-directed 401(k) and other individual-account plans regarding plan-level and investment-level fees and expenses. (The initial disclosures are due by August 30, 2012, for calendar-year plans.) The investment-level information applies only to investments that are "designated investment alternatives." A brokerage window is not a designated investment alternative. So the regulation generally has been read to mean that no investment-level disclosures are required in a plan that does not have any designated investment alternatives but rather offers participants a brokerage window or self-directed brokerage account through which investments may be made in a large number of publicly available investment securities.

Q&A-30 went beyond that by nonetheless requiring investment-level disclosures in brokerage-window-only plans with respect to investment options that were either designated      Continue Reading...

Premium Refunds from Health Insurers May Trigger ERISA Issues
By: Donald Berner

As part of the insurance-market reforms enacted by the Patient Protection and Affordable Care Act (PPACA), insurance carriers are required to spend a minimum percentage of premiums (generally 85%) on medical care and quality improvement.  If this percentage -- the "medical loss ratio" -- is not satisfied, premiums must be returned to the policyholder to the extent necessary to reach the required percentage.

A recent report by the Kaiser Family Foundation (read here) estimates that under this rule, carriers nationwide will be rebating as much as $1.3 billion in total premiums collected during 2011.  Of that, employer-sponsored plans are expected to receive approximately $900 million, and at least some rebates are expected in every state except Hawaii.

When a rebate is received with respect to an ERISA-covered plan, care must be taken to determine whether some portion of the rebate is a "plan asset".  If so, it must be treated in a manner that complies with the ERISA fiduciary obligations that apply to handling plan assets.  The Department of Labor (DOL) has provided some specific guidance on this issue (read here).  The guidance instructs that the rebate generally must be allocated between the employer and the plan participants.  The portion allocable to the participants is a plan asset and must either be returned to the participants or used exclusively for their benefit.

The facts of each arrangement must be considered, but a rebate generally will be allocated between the employer and the plan participants based on their relative contributions to the premiums      Continue Reading...


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Don Berner, the Labor Law, OSHA, & Immigration Law Guy
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Boyd Byers, the General Employment Law Guy
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Jason Lacey, the Employee Benefits Guy
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