DOL Announces Delay in Application of Fiduciary Fee Disclosure Rules
Today EBSA (part of the DOL) announced its intention to delay the applicability date of the new feedisclosure rules under Section 408(b)(2) of ERISA, from July 16, 2011 to January 1, 2012. These interim final rules, published on July 16, 2010, require certain pension plan service providers 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.
According to the EBSA news release, the DOL intended to finalize the rules sufficiently in advance of their July 16 applicability date in order to give plan fiduciaries and service providers time to comply, but final rules simply are not ready. The news release suggests that EBSA may prepare a summary document to assist plan fiduciaries in their review of information furnished by plan providers. EBSA had previously seemed less inclined to adopt a model disclosure summary or form, suggesting in the interim final rules that to do so might impose unnecessary cost and burden on service providers who would have to conform their various disclosure methods to one sanctioned by EBSA (and who would almost certainly pass those costs to plan participants and beneficiaries). EBSA did state, however, that if it were convinced the benefits would outweigh the costs, it might require covered service providers to prepare a one or two page summary disclosure statement. Such a statement might include key information intended to provide plan fiduciaries an overview of the required disclosure and a roadmap intended to direct plan fiduciaries to the more detailed elements of the disclosure. This type of summary would lead to more consistency in the way information is disclosed and help plan fiduciaries more easily compare the information received from different service providers.
This delay will be welcome news for plan fiduciaries and service providers alike. We wonder whether this delay may lead to a delay in applicability date of the new final participant disclosure rules for defined contribution plans, currently scheduled to be effective for the first plan year beginning on or after November 1, 2011. Although we have no official indication of this, we foresee problems implementing participant disclosure rules for self-directed individual account plans when many fiduciaries themselves may not yet have received the disclosures required by the fiduciary fee disclosure rule. We expect more information on this important issue and will update this blog as developments arise.