The Employee Benefits Security Administration (EBSA), a division of the United States Department of Labor (DOL), enforces ERISA on behalf of pension plan recipients across the country. Recently, they published Interim Final Rule 408(b)(2), a disclosure regulation that will require retirement plan service providers to disclose comprehensive information about their fees and also potential conflicts of interest. This new rule helps ensure that pension plan fiduciaries are provided the information they need to assess the reasonableness of service provider compensation and evaluate any potential conflicts of interest that could affect the performance of the service provider.
While these disclosures are the fiduciary obligations of the plan administrators, they will not be liable for reasonable good faith reliance on information received from plan service providers or investment advisors. However, plan fiduciaries are still responsible for the prudent selection and monitoring of plan investment options and service providers.
Rule 408(b)(2) is the final section of a three-part set of rules intended to address fee disclosure. The first section addresses the disclosure of service provider fees. The second section provides interim final rules regarding disclosure of fees by service providers. The final section, Rule 408(b)(2), ensures the disclosure of fees and other information by the plan administrator.
Under this rule, new requirements are scheduled to apply to plan contracts or arrangements for services in existence on or after April 1, 2012. EBSA has sent their final rule to the Office of Management and Budget (OMB) for review. In July 2011, EBSA issued a final regulation to extend and align the applicability dates for retirement plan fee disclosure rules. The effective date for the interim final fiduciary-level fee disclosure rules has been extended from July 16, 2011 to April 1, 2012. The regulation requires covered service providers of retirement plans to disclose comprehensive information about their fees and potential conflicts of interest to ERISA-covered plan fiduciaries. The DOL has also published Technical Release 2011-03 regarding an interim policy on electronic disclosure under the DOL’s final regulation for 404(a) participant-level fee disclosure. The regulation requires employers to disclose additional information about plan and investment costs to workers who direct their own investments in ERISA-covered 401(k) and other individual account retirement plans. This Technical Release is in response to comments made that requested the expansion of the ability of ERISA plans to use electronic disclosure technologies to communicate with plan participants.
