Since 2012, covered service providers (“CSPs”) such as recordkeepers and investment advisors have had to provide annual service and fee disclosures to plan fiduciaries under Section 408(b)(2) of ERISA.  Plan fiduciaries cannot remain idle after receiving these disclosures –  review of the disclosures is a fiduciary duty.  The Department of Labor (“DOL”) requires fiduciaries to review the disclosures to make sure that the services provided are appropriate and the fees charged are reasonable.  If the disclosures are not complete, the fiduciaries have an affirmative obligation to request the missing information from the CSP or report the CSP to the DOL if the information is not provided upon request.  The problem for fiduciaries is that these disclosures are often very hard to understand.

CSPs can provide these disclosures in any form that they think satisfies the requirements under Section 408(b)(2).  There is no template or model disclosure.  The disclosures often refer to other documents to provide the information making it confusing and burdensome for the fiduciaries to review. The DOL has attempted to remedy this problem by issuing a proposed rule that would require CSPs to give fiduciaries a guide along with the disclosures if the disclosures are contained in multiple of lengthy documents.  The guide will contain specific locators to find the required information.  For example, if the service description is found in another document, the guide will be required to provide a specific page number or section identifier.  If this proposed rule becomes final, it may provide welcome relief to fiduciaries who have been struggling to review these disclosures.

For more information on the proposed rule click here.