It’s been two weeks since the DOL issued its proposal to require a new 408(b)(2) fee disclosure summary, and we’re now starting to see the deeper, “second-day” analyses from the law firms that serve the retirement plan market. One of the best of these deeper dives, from the Groom Law Group, describes several new requirements in the March 12 proposed rule that go beyond the new 408(b)(2) summary guide:
• A requirement to provide the guide in a separate standalone document. Instead of a separate standalone disclosure, a covered service provider (CSP) could satisfy its 408(b)(2) obligations though a service contract or similar document as long as all of the required information is included. While many CSPs provide a standalone disclosure, the “old” 408(b)(2) regulation’s flexibility provided some protection from oversights and other minor errors in a disclosure as long as the information was otherwise disclosed. The proposed rule would eliminate this flexibility, the Groom paper notes.
• An attempt by DOL to make the 408(b)(2) an annual, rather than a periodic, disclosure. The proposed regulation introduces a requirement to provide “at least annually” any changes included in the guide itself, as well as to any changes in the information provided in the disclosures about certain investment disclosures. According to the proposal’s preamble, the DOL believes that “a periodic requirement to disclose any changes to the information contained in the guide will be more beneficial to plan fiduciaries and less burdensome to covered service providers than ongoing and sporadic disclosure each time a change to one component of the guide occurs.”
• A new requirement to include the identity and contact information of a person or office the plan fiduciary could contact regarding the 408(b)(2) disclosures — in other words, a point person or office authorized and capable of explaining the CSP’s fee structure and status to the fiduciary.
In addition, DOL included a footnote in the proposed rule acknowledging that its current electronic disclosure regulation does not extend to disclosures from third parties to plan fiduciaries. However, it also asks for comments on whether fiduciaries would benefit if, when sending the guide electronically, CSPs were required to provide a notice comparable to the notice required by DOL’s existing electronic disclosure regulation. This request could signal DOL’s interest in exploring a separate rulemaking establishing an electronic disclosure regulation governing disclosures from third parties to plan fiduciaries, the Groom white paper notes.
