The U.S. Department of Labor (“DOL”) recently announced a new proposal to provide a web-based tool for ERISA covered retirement plans to report violations of the new 408(b)(2) disclosure requirements. Under the new 408(b)(2) regulations, as of July 1, 2012 ERISA covered service providers were required to provide retirement plans, to which they provide services, with certain disclosures. Failure to provide the required disclosures will result in services to the ERISA covered plan being classified as a prohibited transaction under ERISA and the Internal Revenue Code. The purpose of the new tool is to assist plan sponsors in determining whether they have all the required information and to provide an easy way for plan sponsors to report service providers who fail to make the required 408(b)(2) disclosures.
Category Archives: 408(b)(2)
The new ERISA 408(b)(2) regulations, which were recently issued by the U.S. Department of Labor (“DOL”), place disclosure requirements on “service providers” to ERISA covered plans. Specifically, a covered service provider is required to disclose in writing the services to be provided, the service provider’s fiduciary status to the Plan, and a description of all direct and indirect compensation received in connection with services provided to the Plan. Service providers must provide these disclosure requirement to plan fiduciaries in order for a contract for plan services to be “reasonable” as required by ERISA section 408(b)(2).
Service providers are required to provide the new 408(b)(2) disclosures to any ERISA covered plan for which they provide services. However, what exactly is an ERISA covered plan?
Under the new ERISA 408(b)(2) regulation a covered service provider is required to disclose in writing to the responsible plan fiduciary of an ERISA covered plan the services to be provided, its fiduciary status to the plan, and what compensation the service provider is to receive in connection with services provided. The deadline for covered service providers to make these disclosures is July 1, 2012.
ERISA 408(b)(2) Deadline Approaching
May 24, 2012
The final deadline for ERISA covered service providers to meet the 408(b)(2) disclosure requirements is July 1, 2012. Failure to provide the required disclosures will result in a prohibited transaction under ERISA and the Internal Revenue Code. For an investment advisor who is a service provider to an ERISA covered plan this would likely result in the investment advisor having to repay any compensation received after July 1, plus interest. Additionally, the investment advisor could face a fine from the U.S. Department of Labor (“DOL”).
On Monday May 7th, the U.S. Department of Labor’s Employee Benefits Security Administration (“EBSA”) issued Field Assistance Bulletin No. 2012-02 to provide further guidance on compliance with the new 408(b)(2) regulations, which impose disclosure requirements on service providers, such as investment advisers, to retirement plans covered under the Employee Retirement Income and Security Act of 1974 (“ERISA”).
The July 1, 2012, deadline for ERISA service providers to be in compliance with the new 408(b)(2) regulation requirements is quickly approaching. Under the 408(b)(2) regulation requirements, ERISA service providers are required to deliver written disclosures to the plan sponsor to describe the service provider’s services to the plan, the service provider’s fiduciary status to the plan, and the total compensation received by the service provider that is related to the service provider’s services to the plan. Service providers who fail to make the required 408(b)(2) disclosures by the July 1, 2012, deadline may be forced to repay to the plan any compensation received and ultimately can be subject to a twenty percent civil penalty imposed by the Department of Labor.
ERISA 408(b)(2) Disclosure Requirements
May 03, 2012
The U.S. Department of Labor’s 408(b)(2) regulations require “service providers” to ERISA covered plans to provide the responsible plan fiduciary with the information the responsible plan fiduciary needs to make informed decisions when choosing which services providers to hire for the ERISA plan. Specifically, 408(b)(2) requires investment advisers who provide advisory services to ERISA covered plans to disclose in writing the investment adviser’s fiduciary status, the services to be provided by the investment adviser, and a description of all direct and indirect compensation that will be received by the investment adviser.
As we discussed earlier, the U.S. Department of Labor (“DOL”) has issued the final 408(b)(2) regulations, which place disclosure requirements on “service providers” to ERISA covered plans. Under the 408(b)(2) regulation, a covered service provider is any person who provides services to an ERISA covered plan, if the service provider expects to receive at least $1000 for the services provided. The $1000 threshold applies over the life of the services to the plan and is not calculated on an annual basis. Covered service providers that are required to make disclosures pursuant to 408(b)(2) include state and federally registered investment advisers; record-keepers or brokers who make designated investment alternatives available to an ERISA covered plan; and providers of various services such as accounting, legal, insurance, etc. depending on the particular services provided to the ERISA covered plan.
Final ERISA 408(b)(2) Disclosure Regulations
April 19, 2012
The U.S. Department of Labor (“DOL”) has issued the final 408(b)(2) regulations, which impose disclosure requirements on investment advisors to retirement plans covered by the Employee Retirement Income and Security Act of 1974 (“ERISA”). The DOL first proposed these regulations in 2007. The DOL issued an “interim final” rule in July 2010 and then released the final rule in February 2012.
