On Wednesday, March 12, 2014, the Department of Labor (the “DOL”) issued a proposed amendment (the “Proposed Amendment”) to its existing regulations under Section 408(b)(2) of ERISA (the “408(b)(2) Regulations”), requiring that certain service providers to ERISA plans provide, as part of their 408(b)(2) disclosures regarding compensation, a summary guide that is intended to assist plan fiduciaries in reviewing the initial disclosures required by the 408(b)(2) Regulations. The guide is required only to the extent that the service provider’s existing initial disclosures are contained and provided to ERISA plan clients in multiple or lengthy documents.
One Page Guide Required…
The guide requirement in the Proposed Amendment will not apply to all covered service providers required to provide disclosures under the 408(b)(2) Regulations. In the preamble to the Proposed Amendment, the DOL states that covered service providers that furnish required disclosures in a concise, single document will not be required to provide a separate guide to such disclosure. The DOL is concerned that responsible plan fiduciaries face challenges in finding the required information in disclosures that are contained in multiple or lengthy documents, and believes that a guide will help responsible plan fiduciaries navigate the disclosure documents and assist them in assessing and evaluating the reasonableness of the compensation to be paid to the service providers.
…for Service Providers that Currently Provide Disclosure in Lengthy or Multiple Documents
The Proposed Amendment provides that if information that is required to be disclosed under the 408(b)(2) Regulations is not contained in a single document or if such document is in excess of a certain number of pages,1 then covered service providers will be required to furnish a responsible plan fiduciary with a guide specifically identifying the document and page, or other sufficiently specific locator, such as a section reference, that enables the responsible plan fiduciary to quickly and easily find the following information disclosed pursuant to the Final Regulation:
- the description of services to be provided to the plan;
- a statement concerning any services to be provided as a fiduciary and/or as a registered investment advisor;
- a description of all direct compensation (i.e., compensation received directly from a plan);
- a description of all indirect compensation (i.e., any compensation from any source other than a plan, the plan sponsor, the service provider or an affiliate);
- a description of any compensation that will be paid among related parties;
- a description of any compensation that would be paid for termination of the contract or arrangement;
- a description of compensation paid for recordkeeping services; and
- certain recordkeepers or brokers (providing services to a plan that is an individual account plan) and fiduciaries of plan asset vehicle investments, a description of any compensation, annual operating expenses, and ongoing expenses as set forth in the Final Regulation.
Contact Information to be Provided
In addition to the information listed above, the guide must identify a person or office, including contact information that the responsible plan fiduciary may contact regarding the disclosures and the guide must be furnished in a separate document.
Lastly, the covered service provider must, at least annually, disclose any changes to the guide including any changes to the required information described in the last bullet above.
The DOL stated in the preamble to the Proposed Amendment that there is nothing that limits covered service providers from furnishing information required by the 408(b)(2) Regulations to responsible plan fiduciaries via electronic media (e.g., a website). However, any such information posted electronically must be readily accessible to responsible plan fiduciaries. In addition, a covered service provider may not merely furnish a link to a separate contract or to a prospectus, but must provide either (i) a specific link directly to the required information or (ii) a page or other sufficiently specific locator, such as a section, in addition to an electronic hyperlink.
Comment Period and Proposed Effective Date
The DOL has proposed that the guide requirement become final 12 months after publication of the final amendment.
The DOL is currently soliciting comments until June 10, 2014, with respect to the Proposed Amendment.