Emerging issues under interim final regulation on plan service provider fee disclosure

Abstract

Purpose

The purpose of this paper is to describe interpretive and compliance issues arising under the Labor Department's interim final regulations under the statutory exemption for the provision of services provided by Section 408(b)(2) of ERISA, which will become effective on January 1, 2012.

Design/methodology/approach

The paper analyzes the published interim final regulations and considers significant comments filed in response to the proposed regulations.

Findings

Effective January 1, 2012, covered service providers who rely on the statutory exemption for the provision of services provided by Section 408(b)(2) must begin complying with the interim final amendments to the regulations under Section 408(b)(2) (the “Regulation”). Among other changes, the Regulation will require service providers to provide additional disclosures of direct and indirect compensation and to identify whether they expect that they will be providing services as a fiduciary or as a registered investment adviser. The primary purpose of the Regulation is to assist plan sponsors in evaluating service provider relationships, including total compensation that will be received by the service provider and conflicts of interests to which the service provider may be subject. The Regulation will apply to both new and existing service provider arrangements on January 1, 2012. Failure to comply with the Regulation may result in the assessment of excise taxes under Section 4975 of the Internal Revenue Code unless other exemptive relief is available. Service provider arrangements may be eligible for exemptive relief under certain other statutory and administrative exemptions.

Originality/value

The paper describes possible compliance issues that may arise under the Regulation and identifies and evaluates interpretive and compliance issues that have been noted since the proposed amendments were published.

Citation

Occhino, L., Shore, L. and Gosker, E. (2011), "Emerging issues under interim final regulation on plan service provider fee disclosure", Journal of Investment Compliance, Vol. 12 No. 2, pp. 19-32. https://doi.org/10.1108/15285811111142883