NEWS

It's in the Books: DOL Issues Final Regulations on Service Provider Fee Disclosure

The DOL has issued the final regulation on retirement plan service provider fee disclosure. There are two primary changes to note from the interim regulations:

• The compliance date moves TO July 1, 2012 (from April 1)
• A standard fee summary from plan service providers to plan fiduciaries was not provided but an optional guide was

What the changes mean:

With the initial compliance date moved to July 1, plan fiduciaries now have an additional three months to receive and review the required fee disclosure from a covered service provider. For calendar year plans, the participant level initial fee disclosure deadline will now be August 30, 2012 making the first quarterly participant statement (i.e., the 3rd quarter statement) with expense information due no later than November 14.

Although the final regulation discusses a “summary” or similar fee disclosure vehicle supplied by service providers, again--such a summary is optional. The DOL includes a sample two-page Guide to Initial Disclosures that it encourages service providers to use, but each service provider will be able to make its own choice as to the level of summarization it provides. 

From a client service perspective, best practices would dictate that service providers provide such a summary, particularly since the DOL has extended the deadline by three months. If your retirement plan providers do not provide a service and fee summary of some sort, we suggest you complain. Loudly.

Other changes:

• Enhanced service provider disclosure for indirect compensation: covered service providers must describe the arrangement between payer and service provider leading to the indirect compensation-related payments. This should help the plan fiduciary analyze why the payer is compensating the service provider in connection with the provider’s contract or arrangement with the plan.
• Service provider investment disclosures must parallel the required participant level disclosure rules: For example, service providers will have to disclose the total annual operating expenses for each designated investment alternative (DIA). They must also disclose any other information related to a DIA that is reasonably available to the provider if the information is of the type that must be reported to participants
• In some cases, an employer is now required to terminate a service arrangement if there is a failure to disclose. There are special rules which apply to such a situation so employers are urged to contact their advisors if they receive a deficient disclosure or no disclosure at all.

We can help you to gain an understanding of the retirement plan service provider and participant fee disclosure rules so that you know what to expect (or request from) your plan service providers. Please contact either Bill Enck or Roger Prince for more information.