On July 15, 2010, the Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL) issued interim final regulations which require that certain service providers to employee pension benefit plans disclose information to assist plan fiduciaries in assessing the reasonableness of their service arrangements, including the reasonableness of the service providers’ compensation and potential conflicts of interest that may affect the service providers’ performance. Notably, the interim final regulations apply only to service provider contracts relating to employee pension benefit plans, including 401(k) and other defined contribution plans. The DOL has not yet issued rules providing a disclosure framework applicable to service provider contracts for welfare benefit plans. Service providers will need to comply with the interim final regulations beginning July 16, 2011.
In the coming weeks McDermott Will & Emery will be issuing additional guidance on the fee disclosure regulations. In brief, however, the interim final regulations differ from proposed regulations previously issued in many significant respects:
- The final rules do not require a formal written contract describing the disclosure obligations, even though disclosures must be in writing.
- As described above, the final rules issued on July 15, 2010 do not apply to welfare benefit plan service providers.
- The final rules modify the categories of service providers that must comply, including fiduciaries, investment advisors, recordkeepers, brokers and providers of other specified services who receive “indirect compensation.”
- The final rules do not contain specific narrative conflict of interest disclosure provisions.
- The final rules include a new provision requiring that certain providers of multiple services disclose separately the cost to the covered plan of recordkeeping services.
Interested persons can comment to the DOL on the interim final regulations. Comments must be received by the DOL no later than 45 days after the July 16, 2010 publication of the interim final regulations in the Federal Register.