On March 12, 2014, the Department of Labor (the “DOL”) issued a proposed amendment to the final regulations under Section 408(b)(2) of ERISA which is the section of ERISA that requires covered service providers (“CSPs”) to disclose certain fee information to retirement plan fiduciaries.  The final Section 408(b)(2) regulations, issued by the DOL in 2012, generally require CSPs to furnish disclosures sufficient to enable plan fiduciaries to meet their ERISA fiduciary obligations regarding the selection and monitoring of CSPs.  The proposal would require CSPs that make Section 408(b)(2) disclosures in multiple or lengthy documents to furnish a guide intended to assist plan fiduciaries in reviewing such disclosures. 

The DOL proposal would require CSPs to furnish plan fiduciaries with a guide sufficiently specific to enable the plan fiduciary “to quickly and easily find” certain information required by the final Section 408(b)(2) regulations.  The guide would direct the plan fiduciaries to the following information:

●     The description of services to be provided to the plan;

●     The statement concerning any services to be provided as a fiduciary or registered investment advisor;

●     The description of any and all direct compensation, indirect compensation, compensation paid among related parties, and  compensation that would be paid for the termination of the arrangement; and

●     The special required investment disclosures for fiduciary, recordkeeping and brokerage services.

The DOL indicated that the intent of the proposed amendment is to balance the need of plan fiduciaries to comply with their ERISA fiduciary responsibilities and the cost and burdens imposed on CSPs.  The proposal would become effective 12 months following the issuance of the final version of the regulation.

We will continue to monitor this proposal as it moves through the DOL regulatory process.  In this regard, Bass attorney Fritz Richter is the co-leader of an American Bar Association, Tax Section, comment seeking to advise the DOL on improvements and refinements to the proposal.