Are you prepared for the Department of Labor's (DOL) 408(b)(2)requirements?

Do you have a complete understanding of what it is, how you should deal with it, and the hidden perils for failure to comply? This new regulation deals with plan level fee disclosures for any Defined Contribution or Defined Benefit plan covered by ERISA. Plan fiduciaries (you) must receive specified service and compensation disclosures from all Covered Service Providers (CSPs) to your plan by July 1^st.  Next year, your auditors will want to confirm that you took the appropriate steps to comply.

For months, plan service providers have been fretting about making their required fee disclosures because for most, it means putting a spotlight on shockingly high fees for the very first time!  Until now, they could easily be concealed.  In the disclosures we’ve seen thus far, CSP’s have treated their disclosures in a very business-as-usual way – probably because they hope you won’t notice.  But we’re here to make sure that dream doesn’t come true.

This new regulation, coupled with ERISA's 404(a) rules regarding a fiduciary's duty for prudence, requires that that plan sponsors carefully consider plan fees in relation to the services provided. This seems almost silly – because we automatically do this with most purchases we make – but 401(k) providers have made it extremely difficult – even representing that the plans were “free”!  This required disclosure changes all that.  Now, you’ll know exactly what your plan costs are – and we can give you a market perspective that enables you to judge the reasonableness of those costs.  Now is the time to tackle this analysis because the DOL is saying that if plan costs are deemed unreasonable, it constitutes a breach of fiduciary duty. This may sound like a major undertaking, and maybe a little scary too, but we have the tools and know-how to make it a fairly simple task.

Timing and consequences... If any your CSPs fail to provide you with proper and complete disclosures by July 1, you should request the information in writing on July 2nd. If they do not comply within 90 days, you must report them to the DOL and start the process of severing the relationship. At this point, fiduciary prudence would require a full search for a new service provider. Failure to meet these various guidelines could result in a prohibited transaction and breach of fiduciary duties.

The DOL and a court decision in March (Tussey v. ABB, Inc.) established that assessing the reasonableness of fees and service arrangements is a "deliberative" process. If plan fiduciaries do not possess the ability to make such an evaluation internally, they should hire outside, independent, expertise.

TFP is ready to help. We’ll create a 408(b)(2) Due Diligence file which, when accompanied with our Benchmarking Report, constitutes ready proof of compliance. Our 408(b)(2) Compliance Support Services are very affordable; costing less than $5,000 per plan and saving you the time and the headache.

Call us for a no obligation consultation to determine your options and see if we can be of assistance.

Mike Becher 678-338-4366.