The final deadline for ERISA covered service providers to meet the 408(b)(2) disclosure requirements is July 1, 2012. Failure to provide the required disclosures will result in a prohibited transaction under ERISA and the Internal Revenue Code. For an investment advisor who is a service provider to an ERISA covered plan this would likely result in the investment advisor having to repay any compensation received after July 1, plus interest. Additionally, the investment advisor could face a fine from the U.S. Department of Labor (“DOL”).
Category Archives: ERISA
On Monday May 7th, the U.S. Department of Labor’s Employee Benefits Security Administration (“EBSA”) issued Field Assistance Bulletin No. 2012-02 to provide further guidance on compliance with the new 408(b)(2) regulations, which impose disclosure requirements on service providers, such as investment advisers, to retirement plans covered under the Employee Retirement Income and Security Act of 1974 (“ERISA”).
The July 1, 2012, deadline for ERISA service providers to be in compliance with the new 408(b)(2) regulation requirements is quickly approaching. Under the 408(b)(2) regulation requirements, ERISA service providers are required to deliver written disclosures to the plan sponsor to describe the service provider’s services to the plan, the service provider’s fiduciary status to the plan, and the total compensation received by the service provider that is related to the service provider’s services to the plan. Service providers who fail to make the required 408(b)(2) disclosures by the July 1, 2012, deadline may be forced to repay to the plan any compensation received and ultimately can be subject to a twenty percent civil penalty imposed by the Department of Labor.
ERISA 408(b)(2) Disclosure Requirements
May 03, 2012
The U.S. Department of Labor’s 408(b)(2) regulations require “service providers” to ERISA covered plans to provide the responsible plan fiduciary with the information the responsible plan fiduciary needs to make informed decisions when choosing which services providers to hire for the ERISA plan. Specifically, 408(b)(2) requires investment advisers who provide advisory services to ERISA covered plans to disclose in writing the investment adviser’s fiduciary status, the services to be provided by the investment adviser, and a description of all direct and indirect compensation that will be received by the investment adviser.
As we discussed earlier, the U.S. Department of Labor (“DOL”) has issued the final 408(b)(2) regulations, which place disclosure requirements on “service providers” to ERISA covered plans. Under the 408(b)(2) regulation, a covered service provider is any person who provides services to an ERISA covered plan, if the service provider expects to receive at least $1000 for the services provided. The $1000 threshold applies over the life of the services to the plan and is not calculated on an annual basis. Covered service providers that are required to make disclosures pursuant to 408(b)(2) include state and federally registered investment advisers; record-keepers or brokers who make designated investment alternatives available to an ERISA covered plan; and providers of various services such as accounting, legal, insurance, etc. depending on the particular services provided to the ERISA covered plan.
Final ERISA 408(b)(2) Disclosure Regulations
April 19, 2012
The U.S. Department of Labor (“DOL”) has issued the final 408(b)(2) regulations, which impose disclosure requirements on investment advisors to retirement plans covered by the Employee Retirement Income and Security Act of 1974 (“ERISA”). The DOL first proposed these regulations in 2007. The DOL issued an “interim final” rule in July 2010 and then released the final rule in February 2012.
DOL to Seek More Industry Input before Imposing Fiduciary Rule
September 21, 2011
On Monday, the U.S. Labor Department (“DOL”) announced that it is delaying its fiduciary rule proposal until next year. The DOL is seeking to expand the definition of fiduciary under the Employee Retirement Income Security Act (“ERISA”) to include everyone who gives retirement advice. Expanding the definition of fiduciary would mean that everyone who gives retirement advice would always have to act in the best interest of the client.
