Hopefully, you, the responsible plan fiduciary to an ERISA retirement plan, are happily ensconced in your office, reviewing thorough and compliant ERISA Section 408(b)(2) disclosures from the plan’s covered service providers. But what if you didn’t receive the disclosure, or if it is inadequate?
The Department of Labor (“DOL”) regulations provide that the plan fiduciary must request the missing information in writing from the service provider. Guidance does not dictate a specific timeframe under which the fiduciary must make this request; it must be done “upon discovering” that the service provider failed to disclose. Presumably this would be within a reasonable time after the fiduciary determined the disclosure had not been provided or was inadequate. What constitutes a “reasonable” timeframe may depend on how many disclosures you have to review. Of course, if no disclosure at all was provided, those requests should go out posthaste.
If, after the written request is made, the covered service provider fails to comply within 90 days, the fiduciary must notify the DOL of the service provider’s failure to disclose in order to protect the plan from a prohibited transaction. The notice to the DOL must be filed not later than 30 days following the earlier of: (1) the service provider’s refusal to provide the information requested by the plan fiduciary; or (2) 90 days after the plan fiduciary’s written request is made. The DOL has posted a model fee disclosure failure notice. Currently, the notice may be mailed or emailed to the DOL, but last Monday, a direct final rule was published that announces a new online submission process for such notices. As of the date of this post, the online system was still under development by the DOL. Notices may still be mailed to the DOL even after the online system is up and running, and the DOL has provided a new dedicated mailing address in the direct final rule. Because it is not clear whether that new dedicated mailing address should be used immediately or beginning with the effect date of the direct final rule (September 14, 2012), prudent fiduciaries will mail any such notices to both the old (as published in the February 3, 2012 final rule) and new mailing addresses.
Aside from notifying the DOL, a plan fiduciary who does not receive a disclosure or has only an inadequate disclosure will need to determine whether to terminate the arrangement with the covered service provider, in accordance with the ERISA fiduciary duty of prudence. If the information that was requested by the plan fiduciary and was not provided relates to future services, the plan fiduciary must terminate the arrangement as soon as possible.