Noticeably Different

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Update (July 19, 2011): The DOL has delayed the applicability and effective dates for the interim final rule concerning fiduciary-level fee disclosure and the final rule concerning participant-level fee disclosures to April 1, 2012. According to the bulletin, the DOL believes extending the rules applicability dates provides regulated parties with more time to comply with the new disclosure requirements.

Service Providers Face New Retirement Plan Fee Disclosure Regulations

Abbreviations Key

DOL: U.S. Department of Labor

ESOP: employee stock ownership plan

ERISA: Employee Retirement Income Security Act of 1974

IRAs: individual retirement accounts

SEP: simplified employee pension

SIMPLEs: Savings Incentive Match Plan for Employees of Small Employers

(Originally published 9/16/2010) Accountants, lawyers, and other service providers of ERISA employee benefits will have different retirement plan fee disclosure rules to follow next year. Plan sponsors and service providers must be in compliance by July 16, 2011, according to the requirements issued in the Federal Register on July 15, 2010.

“To avoid being on the hook for excise taxes next year, employers need to begin preparing for these federal changes now,” urges Kelly Davis, benefits manager with LarsonAllen. “Failure to comply could result in excise taxes for the service provider, the plan sponsor, or both.”

All businesses that offer employees retirement plans need to be proactive, because it will take time for plan sponsors and service providers to get the service agreements in compliance.

Plans Affected

Plans Not Affected



Profit sharing


Money purchase


ERISA 403(b)

Welfare benefit



Defined benefit


Nonqualified, regardless of plan size


According to the DOL, ERISA calls for plan fiduciaries to act wisely and solely in the interest of participants and beneficiaries when working with service providers and plan investments. ERISA Section 406 prohibits the furnishing of goods, services, or facilities between an ERISA employee benefit pension plan and a “party in interest” to the plan. To be exempt from this rule, under Section 408, certain conditions must be satisfied for a service contract to be “reasonable,” allowing outside services. Examples of exceptions include accounting and legal services, among others.

“The goal of the new requirements is to provide more transparency regarding fees that are paid by a plan and it’s participants,” Davis says. “An employer is responsible for monitoring the fees, and the new rules will provide them information to assist in determining unreasonable costs.”

Terms of the new regulations
Under the new rules, the service provider must disclose specific information to the plan fiduciary with decision making authority, and the plan fiduciary is required to obtain this information if the service provider expects to receive $1,000 or more in compensation. Failure to comply will cause services to be qualified as a prohibited transaction with a party in interest; therefore, the party in interest becomes subject to excise taxes and annual filings. In addition, if the service provider fails to make the proper disclosures, the plan fiduciary must notify the DOL.

Service providers impacted
  • Fiduciaries providing direct services to the plan, investment contract, or investment product
  • Investment advisors providing services directly to the plan
  • Record keepers or brokers of individual account plans with participant directed investments, where the record keeper or broker arranged for one or more of the investment alternatives available under the plan
  • Service providers reasonably expecting to receive indirect compensation from the plan or related parties

Disclosure requirements
The following must be divulged to the plan fiduciary in writing:

  • All direct and indirect compensation to be paid, including any commissions, finder’s fees, 12b-1 fees
  • Payment the service provider expects to receive for termination of the service contract
  • How they will be paid (e.g., from participant accounts, direct bill)
  • Any compensation that will be charged against invested amounts (e.g., surrender charges, loads, redemption fees)

The disclosure must be made before the service contract is effective and again if it is renewed, extended, or changed. All existing and new contracts must be compliant on the effective date, July 16, 2011.

Additional resources

Kelly Davis, Benefit Services Manager or 1-888-529-2648

View our benefit services principals.

Published: 7/19/2011


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