• New DOL Fee Disclosure Regulations
  • September 22, 2010 | Author: Frank E. Berrodin
  • Law Firm: Miller Johnson - Grand Rapids Office
  • Do you know how much compensation your retirement plan service providers are receiving each year for servicing your plan?  If not, you may find out soon.  On July 15, 2010, the U.S. Department of Labor issued interim final regulations requiring retirement plan service providers to disclose to plan fiduciaries all direct and indirect fees they receive for providing services to the plan.

    Although regulations do not require the fees to be disclosed as part of a written contract, the fees must be disclosed in writing.  Therefore, plan service providers who do not currently enter into written contracts with their clients will still not be required to do so.  They will, however, have to prepare a written document disclosing all direct and indirect (like revenue sharing, 12b-1 and sub-transfer agency) fees they receive for servicing plans.

    The requirements apply to all providers of services to retirement plans that are subject to ERISA.  This means that welfare plan service providers and service providers to nonqualified and governmental plans do not have to comply with the new rules.  They also do not apply to service providers who reasonably do not expect to receive $1,000 or more in direct or indirect compensation.  Providers of legal, accounting, actuarial, insurance, and other services are only subject to the disclosure requirements if they receive indirect compensation from the plan.

    The good news is that plan sponsors do not have to take any action as a result of these regulations.  The entire burden is on the plan service provider.  The bad news is that the DOL is likely to finalize another set of regulations later this year or next year that will require plan sponsors to satisfy certain requirements with respect to the manner in which they disclose these fees to their participants.  Stay tuned.

    The final regulations are not effective until July 16, 2011, and they may be revised prior to that date.