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Ask the Experts October 19, 2010
(b)lines Ask the Experts – Fee Disclosure and Church Plans
October 19, 2010 (PLANSPONSOR (b)lines) – “I heard that there are some new regulations that will require my retirement plan vendors to provide complete disclosure of any and all fees they receive in connection with my plan. I am a church plan sponsor; will the new regulations apply to my vendors?”
Reported by PS
Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:
Unless your plan has elected coverage under ERISA (a rarity), no. The new regulations to which you are referring are the interim final regulations under 408(b)(2) of ERISA, so the regulations apply only to retirement plans that are subject to ERISA. Governmental plans, non-electing church plans, and elective deferral plans of 501(c)(3) organizations that satisfy the DoL’s criteria for exemption from ERISA under 29 CFR 2510.3-2(f) are not subject to the new fee disclosure regulations.
However, since vendors will be required to provide comprehensive fee disclosure to their ERISA clients, there is a school of thought that at least some will provide such information to non-ERISA clients as well, in order to avoid the receipt of disparate information among clients. It should also be noted that some vendors already voluntary provide fully transparent disclosures of all fees, direct and indirect, to their clients. Finally, it should be noted that the regulation does not take effect until July 16, 2011, so it will be some time before vendors provide communication to their plan sponsor clients in this regard.
If your plan is not subject to ERISA and you desire comprehensive disclosure of all plan fees from your vendor, of course you can always request that such information be provided voluntarily. However, in our experience, plan sponsors must often resort to a Request for Proposal process to receive accurate disclosure of all direct and indirect fees. The final 408(b)(2) regulations address this issue of lack of voluntary disclosure for ERISA plans by requiring such disclosure.
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.