As noted in my previous Blog entries regarding the ERISA Section 408(b)(2) fee disclosures from covered service providers to plan fiduciaries, the original disclosures were required by July 1, 2012. Since that time, the U.S. Department of Labor (DOL) has been requesting copies of the required disclosures from plan sponsors during retirement plan examinations. As a result of these reviews, the Department of Labor has now issued a proposed amendment to ERISA regulations Section 2550.408b-2 which would add an additional disclosure requirement, specifically a “guide” which it describes as, “a tool to effectively make use of the required disclosures.”

In the Department’s view, the disclosure statements that have been prepared and issued by covered service providers (investment advisors, third-party record-keepers and corporate trustees), have been difficult for fiduciaries to interpret and lack “clarity and specificity”. In the Department’s view, such a guide would in essence be a compilation into a single document, all of the information contained in the existing multiple documents which the current disclosures incorporate by reference. The Department believes that “a guide will assist responsible plan fiduciaries for these plans in finding information that ERISA requires them to assess in evaluating both the reasonableness of the compensation to be paid for plan services and potential conflicts of interest that may affect the performance of those services.”  Unless the plan fiduciaries receive the disclosures, review them and determine that the fees for covered services are reasonable, payment of the fees from the plan would be a prohibited transaction under ERISA and the Tax Code.

The proposed amendment to the regulation would require the service provider to furnish the guide if the initial disclosures are contained in multiple or lengthy documents. The Department is requesting comments with respect to the number of pages that would qualify a disclosure as being “lengthy” or although the disclosure is contained in multiple documents, a maximum number of pages that would be allowed without having to provide the guide. The DOL is also considering rules for electronic delivery of the guide, including direct links to the information in the other referenced documents. Comments to the proposed regulation are invited and will be accepted up to 90 days after the regulations are published in the Federal Register. The proposed regulation can be found at: http://webapps.dol.gov/FederalRegister/HtmlDisplay.aspxDocId=27415&AgencyId=8&DocumentType=1.