Proposed Regulations for Fee Disclosures Affecting 401(k) and Other Benefit Plans

The United States Department of Labor has proposed regulations enhancing the disclosure requirements of service plan providers to plan fiduciaries concerning fees charged and conflicts of interests that may impact the service provider's performance.  The Department of Labor also is considering an exemption for fiduciaries who entering into a contract with service providers who fail to meet their disclosure obligations without the knowledge of the fiduciary.

The proposed regulations are under ERISA section 408(b)(2), 29 U.S.C. § 1108, which exempts certain contracts or arrangements between plans and service providers that would otherwise be prohibited transactions under ERISA section 406, 29 U.S.C. § 1106, if such contracts or arrangements are reasonable.  The proposed regulations address the disclosure requirements applicable to "reasonable contracts or arrangements."  These disclosures in general are (a) the compensation received by the service provider, directly or indirectly, and (b) any conflicts of interest that may arise in connections with the service provider's services to the plan.