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Thursday, February 17, 2011

Department of Labor Announces Intention to Extend Applicability Date of Retirement Plans Fee Disclosure Section 408(b)(2) Regulation












Alabama@Work
By: Tommy Eden, Attorney

On February 11, 2011, the U.S. Department of Labor's Employee Benefits Security Administration announced that it intends to extend the applicability date for the new disclosure rules under section 408(b)(2) of ERISA Retirement Plans to Start Jan. 1, 2012.

The department published an interim-final regulation on July 16, 2010, requiring certain service providers to employee pension benefit plans to disclose information to assist plan fiduciaries in understanding the reasonableness of the fees being charged for plan services and assess potential conflicts of interest that might affect the quality of those services. The new requirements are scheduled to apply to plan contracts or arrangements for services in existence on or after July 16, 2011.

According to an EBSA fact sheet, the rules will require the disclosure of both direct and indirect compensation received by certain service providers so plan administrators and other fiduciaries can better gauge the reasonableness of service providers' fees and identify potential conflicts of interest that might affect service providers' performance.

"The department intended to have final rules in place sufficiently in advance of the July 16 applicability date to avoid compliance problems for both plans and their service providers," said Phyllis C. Borzi, Assistant Secretary of EBSA. "Given the need to ensure a careful review of all the valuable input we received on the interim final rule, including suggestions for a summary document to further assist plan fiduciaries in their review of furnished information, we now believe plans and plan service providers would benefit from an extension of the rules applicability date. An extension of the applicability date to Jan, 1, 2012 will ensure that we have the time we need to get the final rule right and that plans and their service providers have the time they need to undertake orderly and efficient compliance efforts following publication of the final rule," Ms. Borzi said.

Additional information about the about the final regulation is available on EBSA website at www.dol.gov/ebsa.

Common Sense Counsel: if you are an ERISA Plan fiduciary this is critical information you and your Plan Administrator need to review ASAP. There is specific disclosure language, and plan language, which should appear in your ERISA Plan documents, and possibly in your Employee Handbook. Handbooks should be reviewed by your employment law counsel every 2 years, or every 1 year during a Democratic Administration.

Tommy Eden is a Lee County native, an attorney with the local office of Capell & Howard, P.C. and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at tme@chlaw.com or 334-501-1540.