EBSA Releases Final Rule on Fee Disclosures (extends effective date to July 1)

The U.S. Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) issued the final rule for pension and 401(k) plan fee disclosures on Feb. 2. The announcement was jointly made with the U.S. Department of Treasury, which issued a proposal at the same time to reduce regulatory burdens on retirement incomes.

Secretary of Labor Hilda L. Solis said that the new regulations “will greatly increase the level of transparency in retirement plans. When businesses that sponsor retirement plans, and the workers who participate in those plans, get better information on associated fees and expenses, they’ll be able to shop around and make informed decisions that will lead to cost savings and a larger nest egg at retirement.”

EBSA’s publication of the final rule on fee disclosures under ERISA Section 408(b)(2) ends speculation as to what — and when — the final rule would implement. The previous interim rule indicated the final rule was scheduled to take effect April 1; however, as that deadline loomed and no rule was made available to the public for review, some organizations were calling for a deadline extension. EBSA said it extended the deadline for compliance with the new rules back three months to July 1, 2012, to “allow service providers sufficient time to prepare for compliance.”

EBSA’s final rule requires covered service providers to disclose service fees to assist plan fiduciaries to assess the reasonableness of contracts or arrangements related to compensation paid to service providers and identify potential conflicts of interest that may affect the service provider’s performance.

EBSA had previously published an interim final rule in July 2010. The final rule amended the interim rule to incorporate comments and responses to questions, including:

• an exclusion for Code Section 403(b) annuity contracts and custodial accounts;
• requiring a description of the arrangement between a covered service provider and the payer when the covered service provider receives an indirect compensation; and
• disclosure, at least annually, of changes to investment-related information.