Employee Benefits Update

Fee Disclosure Regulations for Retirement Plans

Plan sponsors and plan administrators need to be aware of the restrictions imposed on the payment of service providers from the assets of defined benefit and defined contribution retirement plans. These plans rely on a wide variety of service providers, such as trustees, recordkeepers, investment advisors and auditors, to operate the plans efficiently. However, in general ERISA requires that no more than reasonable compensation may be paid, directly or indirectly, for these services.

The Department of Labor Employee Benefits Security Administration (“EBSA”) recently released interim final Regulations (the “Regulations”) requiring service providers to make certain disclosures regarding the fees and compensation they will receive in return for providing services to retirement plans. These disclosures must be provided to comply with the requirements of ERISA and are intended to assist plan sponsors and fiduciaries in determining whether the compensation paid for these services is “reasonable.” This update provides a summary of the Regulations.

Service Provider Disclosures. Under the Regulations, a contract or arrangement between a “Covered Plan” (generally a defined benefit plan or defined contribution plan subject to ERISA, excluding IRAs, SEPs and Simple Plans) and a “Covered Service Provider” will not be considered reasonable unless the Covered Service Provider makes the disclosures required under the Regulations. A Covered Service Provider is an entity that expects to earn $1,000 or more in compensation from providing services to a Covered Plan, including trustee, recordkeeping, brokerage, auditing, actuarial, consulting and most other services.

To view the full update, please click here.

IRS Circular 230 Disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.