The U.S. Department of Labor's (DOL) Employee Benefits Security Administration has issued a long-awaited final rule that sets specific disclosure requirements for plan service providers under the Employee Retirement Income Security Act (ERISA). The rule takes effect on July 1, 2012, for new and existing contracts or agreements between ERISA-covered plans and their service providers.
The rule requires service providers to furnish information that will enable pension plan fiduciaries to:
- Determine the reasonableness of the total compensation, direct and indirect, that a provider receives from the contract
- Identify any potential conflicts of interest
- Satisfy reporting and disclosure requirements under ERISA
For employers sponsoring pension and 401(k) plans, the DOL says the new rule will shed light on the true costs of offering such plans to their workers.
The DOL also announced that in the near future it intends to publish for public comment a separate proposal that would require service providers to furnish a guide or similar tool to assist plan fiduciaries in identifying and locating the potentially complex information that must be disclosed and that may be located in multiple documents.
According to the DOL, the new rule and its companion participant-level fee disclosure rule, will greatly increase the level of transparency in retirement plans. The latter requires plan administrators to give workers who direct their retirement accounts in 401(k)-type plans easy-to-understand information about the plan investment options available to them.
When businesses that sponsor retirement plans, and the workers who participate in those plans, get better information on associated fees and expenses, says DOL, they'll be able to shop around and make informed decisions that will lead to cost savings and a larger nest egg at retirement.
Plan sponsors and service providers with questions about the final rule can contact EBSA at 202.693.8500.