The US Department of Labor ("DOL") published amendments to Form 5500, the annual report filed by employee benefit plans ("plans") subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), that significantly increase the types and amount of information a plan must report about its service providers on Schedule C: "Service Provider Information." As a result, employee benefit plans are required to disclose detailed information about investment management fees (direct and indirect) received by the investment manager as a result of providing services to the plan. The contents of these reports are public, and plan participants have a right to request copies of the report. A plan must rely on information provided by its investment managers and other service providers in order to complete Form 5500 properly.
Note that reporting of investment manager fees on Schedule C is required of each plan, whether or not the investment vehicles in which it invests exceed the 25 percent "plan assets" threshold.
The DOL has provided a method of simplified reporting that can limit the information about the investment manager that is required to be reported on Form 5500 if an investment manager provides a disclosure to a plan investor detailing the fees received. The disclosure will provide information to the plan, but such information will not have to be reported to the government. It is important for investment advisers to provide the disclosure described above to their plan investors within a reasonable time before the plan’s Form 5500 is due in order to benefit from the simplified reporting. Plans will not ask investment managers for this disclosure. Rather, if plans do not receive the disclosure from investment managers, they will request the information required to complete Schedule C without the simplified reporting. In addition, Schedule C requires plans to list the names of service providers who fail or refuse to provide the information required for a plan to complete Schedule C. Most investment advisers and other service providers would not want such exposure. The Lowenstein Sandler Employee Benefits and Investment Management Groups alert summarizing Form 5500 requirements is available here.