business New ERISA 408(b)(2) Fee Disclosure Deadline- July 1, 2012 June 19, 2012 New fee disclosure regulations issued by the DOL. In my first blog I discussed your “Retirement Plan Fiduciary Duty” to the plan participants which was magnified by the two new regulations. The first of the two new regulations, known as 408(b)(2), regarding fee disclosures in an employee benefit plan becomes effective this summer. The purpose of regulation 408(b)(2) is to create a process that ensures plan fiduciaries, those with control over the plan, know and understand the fees being charged by the plan’s service providers. It is the plan fiduciary’s responsibility to ensure the fees charged to the plan are reasonable.What is reasonable? The first step to complying with this regulation is to ensure all service providers are accounted for. As a plan fiduciary, you should compile a list of all service providers that supply services to the plan. This can include asset custodians, recordkeepers, investment advisors, auditors and anyone else that may provide service for a fee, paid for by the plan, directly or indirectly, out of the plan’s investments.Next, ensure that you have written agreements with all of your service providers. The Department of Labor has stated that fees cannot be considered reasonable unless the agreement to charge the fees is in writing. If the agreement is not in writing, the fees are considered unreasonable and will result in a prohibited transaction, which is required to be disclosed on the Annual Form 5500.The last step, which is generally the responsibility of your service provider, but again, being the plan’s fiduciary, you are not off the hook here, is making sure service providers are given disclosures to the plan, which include:A description of the servicesVerification whether or not they are a fiduciary under ERISAAll direct and indirect compensationAny related party compensationAny termination compensationThe deadline for these disclosures is July 1, 2012. If the service providers fail to disclose this information, it is your responsibility to notify the DOL.Read part 1 of our blog series “Retirement Plan Fiduciary Duty”.The final part of this series will discuss the second regulation, ERISA 404 (a)(5), which will be effective later this summer. This regulation bears the most risk to the plan’s fiduciaries, which is why you should become very familiar with its guidelines.For more information visit the employee benefit plan page on our website.
