Source: http://blog.ebeclaw.com/2011/02/summary-of-four-different-rules-or_16.html
Timestamp: 2019-04-24 12:59:48+00:00

Document:
Fee disclosure by fiduciaries to participants for participant-directed 401(k) plans regarding investment options with a comparative chart of investment options and with the administrative expenses of each option is required under DOL regulations proposed in July 2008 and finalized in Oct. 2010.
DOL regulations § 2550.408b-2, proposed in December 2007 and substantially revised as interim regulations in July 2010 amends DOL Reg. § 2550.408b–2 to clarify the meaning of a ‘‘reasonable’’ contract or arrangement.
· This disclosure is in order for the fiduciary to be able to determine that the services are reasonable.
A “covered service provider” is a service provider that enters into a contract or arrangement with a covered plan (which is defined as an ERISA pension plan) and reasonably expects $1,000 or more in direct or indirect compensation to be received in connection with providing certain enumerated services, which are services provided as a fiduciary to an investment contract, product or other entity holding plan assets, services provided as an investment advisor to the plan, certain recordkeeping and brokerage services and other services for which service provider, affiliate or subcontractor expect to receive indirect compensation. DOL Reg. § 2550.408b-2(c)(1)(iii).
The service provider must disclose any additional information relating to compensation to the responsible plan fiduciary within the following time periods: (i) reasonably in advance of the date of contract or renewed, (ii) within 30 days of when the investment holds plan assets, and (iii) as soon as an investment alternative is designated. Changes in the disclosed information must be communicated no later than 60 days from the date of change.
Generally. The Department of Labor has issued regulations – proposed in 2008 and finalized in 2010 – requiring fiduciaries of individual account plans to provide specific disclosures to participants concerning plan investment options including fee and expense information. The concern is that participants in individual account plans be given sufficient information on investment choices including fees and expenses.
The regulations provide that when a plan allocates investment responsibilities to participants under a participant directed individual account plan, the plan administrator must make sure that participants are made aware of their rights and responsibilities with respect to the investment of assets, and that sufficient information is provided regarding the plan and the plan's investment options including fee and expense information to make informed decisions how to invest their accounts.
The plan administrator must provide participants certain plan-related information and certain investment-related information, as described below.
· individual expense information including fees and expenses that may be charged to individual account of participant, such as fees for plan loans and for processing QDROs.
This information must be given to participants on or before the date they can direct their investments, and then annually thereafter.
Statements must be furnished to participants at least quarterly showing the dollar amount of the plan-related administrative and individual fees and expenses actually charged to the individual accounts, as well as a description of the services. These disclosures may be included in quarterly benefit statements required under ERISA § 105.
· a glossary of investment-related terms to understand the plan's investment options, or an Internet website address that provides access to such a glossary.
Comparative Format Requirement. Investment-related information must be furnished on or before the date participants can first direct their investments, and annually thereafter; this information must be furnished in a chart format to facilitate comparison of investment options. The regulations include an appendix with a model comparative chart.
Effective Dates. The final regulations become effective on December 20, 2010. They become applicable to covered individual account plans for plan years beginning on or after November 1, 2011.
The regulations were reproposed in March of 2010. Reproposed DOL Reg. § 2550.408g–1 follows the requirements of ERISA § 408(g) that must be satisfied in order for the investment advice-related arrangements to be exempt from the prohibited transaction restrictions of § 406.
 A related rule also added by the Pension Protection Act of 2006 adds ERISA § 408(b)(17) provides that if a person is a party-in-interest solely by reason of providing services to the plan, and is not an investment advisor to the plan, then transactions under ERISA § 406(a)(i)(A), (B) or (D) (sale, exchange, lease or loan) will not be prohibited, so long as the plan pays no more than, and receives no less than adequate consideration. There are currently no regulations regarding § 408(b)(17).
 72 Fed. Reg. 70988 (Dec 13, 2007). The proposed regulations had been put on hold in connection with President Obama’s January 2009 sixty day regulatory moratorium for proposed regulations and regulations not yet effective. 74 Fed. Reg. 4435 (Jan. 26, 2009).
 DOL Reg. §§ 2550.404a-5 and 2550.404c-1, 73 Fed. Reg. 43014 (July 23, 2008).
 DOL Reg. §§ 2550.404a-5 and 2550.404c-1, 75 Fed. Reg. 64910 (Oct. 20, 2010).
 Preamble to regulations, 75 Fed. Reg. at 64910.
 DOL Reg. § 2550.404a-5(c)(1)(i), (c)(2)(i) & (c)(3)(i).
 DOL Reg. § 2550.404a-5(c)(2)(ii) & -5(c)(3)(ii).

References: § 2550
 § 2550
 § 2550
 § 105
 § 2550
 § 408
 § 406
 § 408
 § 406
 § 408
 § 2550
 § 2550