ERISA 408(b)(2) Final Regulations Effective July 1, 2012

The Department of Labor (DoL) has recently released new rules regarding the ERISA 408(b)(2) Servicer Provider Rules and ERISA 404(a) Participant Disclosure Rules. 408(b)(2) regulations become effective July 1, 2012.

Service Provider Rules (ERISA 408(b)(2))

The final rule extends the date of Service Provider Fee Disclosure to July 1, 2012. This allows service providers an additional three months to provide the required disclosures to plan fiduciaries. As you may recall, the original effective


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date was July 16, 2011, and the DoL initially proposed an extension to January 1, 2012. Please keep in mind that the 408(b)(2) regulation was issued as “interim final” and the DoL has indicated that the final rule should be released prior to the end of the year.

Participant Disclosure Rules (ERISA 404(a))

Importantly, plan fiduciaries should be aware that this delay will also impact the distribution of new required participant disclosures as required delivery dates are tied to the effective date of the 408(b)(2) regulation. Thus, for calendar year plans, the initial disclosure of plan-level and investment-level information must now be distributed no later than August 30, 2012. The first quarterly statement under the new rules must be furnished no later than November 14, 2012.

This rule, which was previously slated to go into effect on April 1, 2012, requires service providers to disclose to plan sponsors information about: (1) the services to be performed; and (2) the fees and compensation to be received for performing those services. The intent of the regulation is to make it easier for plan fiduciaries to assess the reasonableness of the fees paid to service providers in comparison with the service provider’s delivery of services and performance. The action extends the effective date to July 1, 2012 in order to give service providers more time to respond to specific changes from the interim regulation.

By coordinating the transition rule with the 408(b)(2) effective date, the DoL intends to allow all plan fiduciaries to receive required disclosures from service providers prior to having to send notices to participants. The DoL also clarified that the first quarterly disclosures under the regulation should be provided 45 days after the quarter in which the initial disclosures have been made.

If you have any questions about how these new 404(a) and 408(b)(2) regulations apply to you, please contact us.

Related Topics
    408(b)(2), 408 b 2, 408b2, 408 b 2 regulations, ERISA 408(b)(2)
About Rick Holden

Rick Holden is a principal member and helped to establish the San Francisco office of Cambridge in 2002. Rick holds the Registered Representative and the Investment Advisor Representative designations by having passed FINRA’s Series 7 and Series 65 exams respectively. He is also a licensed insurance agent and designs comprehensive insurance plans for clients.

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