DOL Issues Proposed Rule Requiring Guide for 408(b)(2) Disclosures

by Goodwin
Contact

On March 11, the Department of Labor (the “DOL”) issued a proposed rule (the “Proposed Rule”) which would require employee benefit plan “covered service providers” (as defined in the 408(b)(2) disclosure regulation of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) to provide a “guide” to augment the disclosures currently required by that regulation if such disclosures are provided in multiple or lengthy documents.  The DOL subsequently released a fact sheet describing the Proposed Rule as well as an information collection request regarding the effectiveness of the existing disclosure requirements under Section 408(b)(2).  Section 408(b)(2) provides a prohibited transaction exemption for the provision of services and requires that the services be provided pursuant to the reasonable arrangement and for not more than reasonable consideration payable from the plan.

As discussed in the May 1, 2012 Financial Services Alert, under Section 408(b)(2) of ERISA and the final regulation issued thereunder (the “Regulation”), “covered service providers” must provide certain specific disclosures (the “Disclosures”) to the responsible plan fiduciary detailing fees charged to or paid by plans in order for service arrangements to be considered “reasonable” under Section 408(b)(2) of ERISA.  The Regulation was intended to ensure that plan fiduciaries would be provided the information needed to assess (a) the reasonableness of the compensation to be paid for plan services, and (b) potential conflicts of interest that could affect the performance of those services.  The DOL did not require such Disclosures to be provided in any particular format, and permitted service providers to utilize different documents from different sources as long as all of the documents collectively contained the required information.  In releasing the Proposed Rule, the DOL noted that some plan fiduciaries need an additional tool to make effective use of such Disclosures if they are provided in multiple or lengthy documents.

The Proposed Rule would require covered service providers to provide a guide along with the Disclosures required by the Regulation, if such Disclosures are contained in multiple documents, or in a document in excess of a specified number of pages.  The DOL reserved for comment the number of pages which would necessitate the provision of a guide.  The Proposed Rule would not require covered service providers to provide a guide if all of the Disclosures are provided in a single concise document.

If required, the proposed guide must specifically identify the document and page, or “other sufficiently specific” locator such as section identification, that would enable the responsible plan fiduciary to quickly locate the following information, if applicable to the contractual arrangement: (a) the description of services to be provided to the plan, (b) a statement concerning any services to be provided as a fiduciary, (c) a description of all direct compensation, (d) a description of all indirect compensation, (e) a description of any compensation that will be paid among related parties, (f) a description of any compensation for termination of the arrangement, (g) a description of all compensation for recordkeeping services, and (h) certain financial product fees and expenses associated with plan asset vehicles.  The guide must also identify a person or office, including contact information, that a plan fiduciary may contact regarding the Disclosures.  Although the DOL did not include a model guide with the Proposed Rule, it previously released a sample guide with the Regulation which may be helpful.

The DOL has requested comments on (1) the standard to determine when a guide would be required (including whether a page number standard is the correct standard and what number of pages would be appropriate), (2) the structure of the guide and whether its requirements would be reasonable and cost effective, (3) any alternative tools that would assist plan fiduciaries in reviewing the Disclosures, and (4) whether an amendment of the Regulation should instead require a summary of “key” disclosures.  The DOL is accepting comments through May 12, 2014.

The DOL also announced its intention to conduct approximately eight to ten focus group sessions with approximately 70 to 100 fiduciaries of small pension plans (less than 100 participants) to explore current practices and the likely effects of the Proposed Rule.

The Proposed Rule would be effective 12 months after publication in final form in the Federal Register; it is not clear whether the Proposed Rule would apply to all service arrangements, including existing arrangements, or only to those entered into, or perhaps modified, after the effective date.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin | Attorney Advertising

Written by:

Goodwin
Contact
more
less

Goodwin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.