Many service providers to plans covered by the Employee Retirement Income Security Act of 1974 (ERISA) (with certain exceptions) were required to provide disclosures to responsible plan fiduciaries by July 1, 2012, regarding compensation they are receiving and potential conflicts of interest. A failure to meet these disclosure obligations results in a prohibited transaction under ERISA and the Internal Revenue Code of 1986 (IRC) by the service provider.
Even though a service provider fails to make adequate disclosure, a responsible plan fiduciary will not be considered to have engaged in a prohibited transaction, provided the responsible plan fiduciary did not know the service provider failed to make the required disclosure, and it reasonably believed that disclosure was made. A “responsible plan fiduciary” is a fiduciary with authority to cause the plan to enter into, extend, or renew the contract with the service provider.
The responsible plan fiduciary must review a service provider’s 408b-2 disclosure for completeness, reasonableness of compensation, and any potential conflicts of interest. If the responsible plan fiduciary discovers deficiencies with respect to a service provider’s disclosure, it must request in writing that the service provider correct the deficiency. In the event that the deficiency is not corrected within 90 days of the responsible plan fiduciary’s written request (or the service provider refuses to furnish the requested information, if earlier), then the responsible plan fiduciary is obligated to notify the U.S. Department of Labor (DOL) of the service provider’s failure within 30 days. The responsible plan fiduciary should also terminate the service provider as soon as possible, consistent with its fiduciary duty of care.
Previously, the notice to the DOL could be sent to an electronic or regular mailing address. While the notice may still be sent by regular mail, a new mailing address must be used:
U.S. Department of Labor
Employee Benefits Security Administration
Office of Enforcement
P.O. Box 75296Washington, D.C. 20013
The notice may no longer be sent via e-mail. Instead, the notice may be submitted electronically by following the instructions on the “Fee Disclosure Failure Notice” page on the DOL website. Also available at the website is a model fee disclosure failure notice that may be completed and submitted to the DOL by regular mail. However, responsible plan fiduciaries choosing to utilize the model notice should take note that, as of the date of this publication, the model notice still uses the previous mailing address.