Where’s My Fee Disclosure Information?

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

As we discussed in our previous Benefits eAuthority regarding the final rules on service provider fee disclosures, the U.S. Department of Labor (DOL) issued final regulations setting forth the fee disclosure obligations for retirement plan service providers. Generally, service providers were required to provide plan fiduciaries these mandated fee disclosures by July 1, 2012. But what must a plan fiduciary do if the service provider doesn’t provide the necessary disclosures?

The required fee disclosures must be provided as part of ERISA’s fiduciary requirements—plan fiduciaries have the duty to analyze whether arrangements with service providers are reasonable, the services are necessary for operation of the plan and no more than reasonable compensation is paid for the services. To allow plan fiduciaries to evaluate the reasonableness of the service provider compensation and potential conflicts of interest, the DOL issued these final rules.

By now, many plan fiduciaries have received the disclosures from their service providers, but there are some that have not. If a service provider has not provided the required disclosures yet, plan fiduciaries must reach out to the service provider immediately, in writing, requesting the required information. If the service provider doesn’t provide this information within 90 days after receiving written notice, the plan fiduciaries must notify the DOL of the service providers who have failed to comply. The DOL has a sample notice that plan fiduciaries may use for this purpose. Currently, this notice may be mailed to the DOL or emailed to OEDelinquentSPnotice@dol.gov. Effective September 14, 2012, the DOL will eliminate the electronic mail address and provide a dedicated link on the department’s website for electronic submissions. In addition, there will be a new dedicated post office box that the DOL has established to replace original postal mailing address provided under the regulation.

In the event that a service provider fails to provide the required disclosures, the plan fiduciaries must determine whether it is prudent to continue the contract with the service provider or if the contract should be terminated. If the service provider does not provide the necessary fee and conflict information to the plan fiduciary, it will be very difficult for the plan fiduciaries to assess the reasonableness of the contract.

In addition to the service provider fee disclosure, plan fiduciaries must continue to work on complying with the participant-level fee disclosure requirements. Plan fiduciaries must furnish to participants the first annual fee disclosures by August 30, 2012 and the first quarterly fee disclosures by November 14, 2012 (for calendar year plans). Another consideration in making sure plan fiduciaries get the proper service provider fee disclosures is that they may need the disclosures to allow them to comply properly with the participant-level fee disclosure requirements in the event that their service providers are not preparing them.

Ultimately, the plan fiduciaries are responsible for obtaining the fee disclosures from the service providers. In the event that they have not received all the disclosures, they must act now or risk fiduciary liability.

Stacey A. Huse is Of Counsel in the Indianapolis office of Ogletree Deak


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.

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