The Department of Labor (DOL) recently announced that its 2010 “interim final” rule for plan service providers to disclose their fees will not take effect July 16, 2011, as previously planned. Instead it will be delayed until Jan. 1, 2012, while the DOL works on a “final” rule. The final rule will then apply to both new and existing service provider contracts.

The service provider fee disclosure rules, also known as “408(b)(2)” rules, are designed to help plan fiduciaries fulfill their duty to ensure that retirement plans and plan participants are charged no more than “reasonable” fees by plan service providers. Otherwise, both the service provider and the fiduciaries can be subject to sanctions for allowing a “prohibited transaction” to occur.

The rules cover plan service providers, such as trustees, recordkeepers, third-party administrators, brokers, and investment advisors. They require providers to disclose to the plan, in advance, the fees they will receive, both from direct charges to the plan or plan accounts, and indirectly from revenue sharing and through relationships with other providers. This will require providers to tease out and disclose fees that may be hidden in a “bundled” platform, so that plan administrators can better monitor and compare them.

These rules will apply to all defined benefit and defined contribution plans, regardless of size, and to all providers that will receive at least $1,000 directly or indirectly from the plan.