Employee Benefits Plans: DOL Issues Final Rule on ERISA Fee Disclosures

In early February, the Department of Labor issued its final rule regarding fee disclosures by service providers to Employee Retirement Income Security Act (ERISA) plans. For your reference, here is a roundup of legal advisories on the final rule and related regulatory developments: 

DOL Finalizes ERISA Disclosure Requirements for Retirement Plan Service Providers (Sutherland Asbill & Brennan LLP)

“On February 2, 2012, the Department of Labor (DOL) published ‘final final’ regulations on the new disclosure and related requirements under ERISA for certain service providers to retirement plans. The DOL previously issued ‘interim’ final regulations on July 16, 2010, which were proposed in December 2007.” Read the full update»

DOL Issues Final ERISA 408(b)(2) Regulations and Delays Effective Date (Dechert LLP)

“The Regulation’s effective date has been extended by three months to July 1, 2012 (from April 1, 2012) to allow additional time for compliance. Therefore, covered service providers must now provide initial disclosures to covered plans prior to July 1, 2012. The Regulation generally retains the basic structure and content of the interim final regulations…” Read the full update»

Legal Alert: Final Section 408(b)(2) Disclosures Regulation Published; Disclosure Deadline Extended (Ford & Harrison LLP)

“These disclosure requirements are established as part of a statutory exemption from ERISA’s prohibited transaction provisions… The new effective date for CSPs also impacts when plan fiduciaries must make participant-level disclosures. For calendar year plans, the initial annual disclosure of plan-level and investment-level information must be furnished no later than August 30, 2012.” Read the full update»

Fee Disclosure Rules for Defined Contribution Plans: Deadlines Extended for Disclosures to Plan Participants & New Obligations on Plan Sponsors under Service Provider Regulations (Patterson Belknap Webb & Tyler LLP)

“Because the first quarterly disclosures are due 45 days after the end of the first quarter in which the first Initial Notices are due, for calendar year plans and most non-calendar year plans the first quarterly disclosure must generally be furnished by November 14, 2012.” Read the full update»

New Effective Dates for Service Provider and Participant-Level Fee Disclosures (Epstein Becker & Green, P.C.)

“The requirements apply to defined benefit and defined contribution plans but do not apply to individual retirement accounts, individual retirement annuities, simplified employee pension plans, simple retirement accounts, or to welfare benefit plans (although proposed rules for welfare benefit plans may be published in the future).” Read the full update»

DOL Releases Final 408(b)(2) Disclosure Regulation (Morgan Lewis)

“Service providers to ‘covered’ plans—such as investment advisers, broker-dealers, banks, insurance companies, and recordkeepers—now have just under five months to determine whether they need to provide additional disclosures to their existing clients and, if so, to get those disclosures to their clients. They also will need to develop procedures to ensure that new clients receive the necessary disclosures, and that clients are updated on any changes to previously provided information.” Read the full update»

Compensation & Benefits: In Focus – Winter 2012 (Katten Muchin Rosenman LLP)

“Under the final rule, covered service providers (CSPs) who expect to receive at least $1,000 in compensation for providing services to a covered plan are required to give fiduciaries of the plan information they need to (1) assess the reasonableness of direct and indirect compensation received by the CSP, its affiliates, and/or subcontractors; (2) identify potential conflicts of interest; and (3) satisfy reporting and disclosure requirements under ERISA.” Read the full update»

Obligations and Liabilities of Retirement Plan Fiduciaries under the Final DOL Fee Disclosure Rules (Wilson Sonsini Goodrich & Rosati)

“In addition, 401(k) plan fiduciaries will be required to disclose to participants the fees charged to the retirement plan and to participant accounts. 401(k) plan fiduciaries must provide a fee disclosure statement to participants no later than 60 days after the vendor fee disclosure deadline (i.e., no later than August 30, 2012).” Read the full update»

Final ERISA Fee Disclosure Rules (Ropes & Gray LLP)

“The exemption under Section 408(b)(2) of ERISA permits a service provider to an employee benefit plan to receive compensation for the services if no more than ‘reasonable compensation’ is paid for ‘necessary’ services under a ‘reasonable’ arrangement. Under the new rule, where applicable, an arrangement for providing services will be treated as reasonable only if the service provider discloses to the plan specified compensation-related and other information.” Read the full update»

D-Days: DOL Closes Circle On Disclosure (Warner Norcross & Judd)

“But for a statutory exemption, the furnishing of goods and services between a plan and a party in interest is a prohibited transaction under ERISA. However, Section 408(b)(2) provides a statutory exemption if the contract is reasonable, the services are necessary, and no more than reasonable compensation is paid.” Read the full update»

DOL Issues Final Retirement Plan Fee Disclosure Rule (Davis Wright Tremaine LLP)

“Heeding many commenters’ requests, the final rule includes a model chart that summarizes all of the required service provider fee disclosures in one place. Although use of this model summary is currently not required, the DOL indicated that it intends to issue further guidance on the tools that service providers may be required to furnish to plan fiduciaries to assist in their review of fees and other disclosures by plan service providers.” Read the full update»

DOL Issues Final Fee Disclosure Rule (Littler)

“Where applicable, investment-related fee disclosures may be provided in the form of the investment alternative issuer’s own current disclosure materials, or information replicated from such materials, regardless of whether the disclosure materials themselves are regulated, provided that the issuer is regulated, and the service provider acts in good faith, does not know that the materials are incomplete or inaccurate, and provides no representations as to the accuracy and completeness of such materials.” Read the full update»

Department of Labor Issues Final Fee Disclosure Regulation (Snell & Wilmer L.L.P.)

“The plan administrator must furnish certain information to each investing participant or beneficiary subsequent to an investment in a designated investment alternative. The required disclosures include any materials provided to the plan relating to the exercise of voting, tender and similar rights, to the extent such rights are passed through to such participant or beneficiary under the terms of the plan.” Read the full update»

DOL Issues Final Fee Disclosure Rule (Bryan Cave)

“If a covered service provider makes a good-faith error or omission in disclosing the required information, the service provider must disclose the correction information to the responsible plan fiduciary as soon as practicable, but not later than 30 days from the date on which the covered service provider knows of such error or omission.” Read the full update»

401(k) Fee Disclosure Deadlines Extended Three Months; Other Changes Made in Final Regulations Under ERISA 408(b)(2) (Christine Roberts)

“Failure to comply with the fee disclosure requirements constitutes a prohibited transaction (PT) for the responsible fiduciary, whereas compliance qualifies the fiduciary for a PT exemption. The final rule changes one of the conditions for the PT exemption when a service provider has failed to provide compensation information and also has not responded to the fiduciary’s written request for the information within 90 days.” Read the full update»

Effective Date Extended For Fee Disclosure Requirements (McAfee & Taft)

“In addition to announcing the extension of the effective date, the DOL has modified the regulations to exclude certain 403(b) plans from the new disclosure requirements. Specifically, 403(b) annuity contracts and accounts are not subject to the new disclosure requirements if (i) they were issued to employees before January 1, 2009, (ii) the employer ceased making contributions, (iii) rights of individual owners of the contracts or accounts are enforceable against the insurer or custodian with employer involvement and (iv) such individual owners are fully vested.” Read the full update»

Related Reading:

The Employee Benefits Landscape in 2012: PART I (Dinsmore & Shohl LLP) 

How Financial Advisors Can Use the 2012 Changes in the Retirement Plan Industry to their Advantage (The Rosenbaum Law Firm P.C.) 

2011-2012 Regulatory Agendas for Employee Benefits Published by Treasury and DOL (Sutherland Asbill & Brennan LLP) 

DOL Issues Electronic Guidelines for New 2012 Participant Investment and Fee Disclosures (McDermott Will & Emery) 


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