DOL Begins Rulemaking Process for 408(b)(2) Service Provider Fee Disclosure Guides
Earlier this month, the Department of Labor (DOL) began the process of amending the final ERISA Section 408(b)(2) service provider fee disclosure regulations to assist fiduciaries in their review of the fees that such service providers charge to a plan. Under Section 408(b)(2) of ERISA, plan fiduciaries are required to ensure that the plan pay “reasonable compensation” for services rendered to the plan. The final service provider fee disclosure regulations that the DOL issued in 2012 were designed to assist fiduciaries in evaluating whether compensation paid to plan service providers is reasonable.
In practice, since the DOL finalized these regulations, the DOL has found that service providers often provide confusing disclosures that make it difficult for fiduciaries to evaluate what fees the service provider is charging the plan. The proposed rules would require that service providers whose disclosures include references to multiple or lengthy documents provide fiduciaries with a guide to these documents. This guide, if required, would be designed to help the fiduciary quickly locate information about the service provider’s fees, including direct compensation being charged to the plan, recordkeeping fees, investment disclosures, as well as a description of the services rendered to the plan.
In preparing to formulate draft amendments to the regulations, the DOL is inviting the public to comment on the proposed amendments and will later hold focus groups of fiduciaries to small pension plans. The DOL aims to get feedback on the impact of the current 408(b)(2) regulations as it prepares the first draft of proposed amendments to the regulation.