ERISA-DOL Issues Final Regulations For Service Provider Disclosures Under Section 408(b)(2); Effective Date Delayed

The U.S. Department of Labor (the “DOL”) has issued final regulations (at 29 CFR § 2550.408-2(c)) on service provider disclosures under section 408(b)(2) of ERISA. These final regulations supercede the interim regulations that were issued on July 16, 2010. In general, they require covered service providers to furnish the plan administrator of a covered plan with information about the providers’ services and fees. The DOL discusses the final regulations in a Fact Sheet. Also, a list of the changes made in the final regulations to the interim regulations may be found here.

Importantly, the effective date of rules for service provider disclosures has been postponed from April 1, 2012 to July 1, 2012. Here is what the Fact Sheet says on the new effective date:

The final regulations are effective for both existing and new contracts or arrangements between covered plans and covered service providers as of July 1, 2012. Service providers not in compliance as of July 1, 2012, will be subject to the prohibited transaction rules of ERISA section 406 and Internal Revenue Code section 4975 penalties.

Plan administrators are reminded that the final regulations’ new July 1 effective date also will impact when disclosures must first be furnished under DOL’s participant-level disclosure regulation (29 CFR § 2550.404a-5). The transitional rule for the participant-level disclosure regulation was revised in July 2011 so that the first disclosures would follow the effective date of the 408(b)(2) regulation. Consequently, for calendar year plans, the initial annual disclosure of “plan-level” and “investment-level” information (including associated fees and expenses) must be furnished no later than August 30, 2012 (i.e., 60 days after the 408(b)(2) regulation’s July 1 effective date). The first quarterly statement must then be furnished no later than November 14, 2012 (i.e., 45 days after the end of the third quarter (July through September), during which initial disclosures were first required). This quarterly statement need only reflect the fees and expenses actually deducted from the participant or beneficiary’s account during the July through September quarter to which the statement relates.

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