The DOL recently announced an extension of the deadline for service providers to comply with Section 408(b)(2) regulations. These rules govern the disclosure of fees charged to qualified retirement plans (e.g., 401(k) and defined benefit pension plans). Disclosures were originally required by July 16, 2011, which has now been extended to January 1, 2012.
The interim fee disclosure regulations were originally published on July 16, 2010 and are intended to help plan fiduciaries analyze and understand the fees being paid for various retirement plan services. The DOL felt that the true cost of these services was increasingly difficult for plan sponsors to understand (e.g., revenue sharing). Now, service providers must disclose the compensation attributable to a particular service, even when there is no explicit charge for the service.
Here’s a brief summary of the items that need to be included in the disclosures:
- Information must be provided in writing, but does not need to be in a formal written contract. Our understanding is that a proposed fee summary is sufficient.
- Disclosures must include a description of the services and all direct and indirect compensation for the services.
- All consequential services must be disclosed, even if they are part of a bundled arrangement. So, service providers need to disclose the actual cost of a service even if it is thrown-in for “free” as part of a bundled solution.
- Providers must disclose whether any of their services are performed in the capacity of a fiduciary to the plan.
- Additional disclosures regarding plan investments and options.
It’s unclear at this time whether the final rules will contain any material changes to the interim regulations. The only hint from the DOL was that there were “suggestions for a summary document to further assist plan fiduciaries in their review” of information supplied by service providers.
