Service providers are required to provide the new 408(b)(2) disclosures to any ERISA covered plan for which they provide services. However, what exactly is an ERISA covered plan?
Under the ERISA 408(b)(2) disclosure requirement, a ‘covered plan’ means an employee pension benefit plan or a pension plan. Section 1102(2) of the Employee Retirement Income Security Act of 1974 (“ERISA”) defines the terms “employee pension benefit plan” and “pension plan” as any plan that “(i) provides retirement income to employees, or (ii) results in a deferral of income by employees…regardless of the method of calculating the contribution made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan.” In plain English terms this means that the 408(b)(2) requirements apply to any employee benefit plan whether the benefits are defined or the employee is responsible for making contributions.
However, the new ERISA 408(b)(2) regulation does contain exceptions to the definition of “covered plan”. Specifically, the 408(b)(2) regulations do not apply to any plan, including a pension plan, under which no employees are participants in the plan. Further, the 408(b)(2) rule release provides some specific examples of what is not considered a covered plan for purposes of the 408(b)(2) disclosure requirement. The following are not required to receive the 408(b)(2) disclosures:
a) a “simplified employee pension”;
b) a “simple retirement account”;
c) an individual retirement account (IRA) or an individual retirement account annuity;
d) a 403(b) plan that consists exclusively of “frozen” contracts or accounts;
e) health savings accounts;
f) a Keogh or “HR-10” plan that provides benefits only to a business owner and his or her spouse or only to partners in a partnership and to his or her spouse with respect to the partnership.
If you have any questions as to whether your investment adviser is required to provide the 408(b)(2) disclosures to your retirement plan clients, one of our consultants would be happy to assist you. If you are already a client of RIA Compliance Consultants, please contact your consultant. If you are a new client, click here to schedule a time to speak with one of our consultants.