July 1 Deadline Approaching for Service Provider Disclosures

As all sponsors and fiduciaries of tax-qualified retirement plans should know by now, written fee and expense disclosures are due to be provided to plan fiduciaries by “covered service providers” by July 1. As we explained in a prior post, this important disclosure is mandated by final regulations under ERISA Section 408(b)(2). The disclosure requirements apply to a variety of retirement plan service providers, such as providers of fiduciary services, investment managers, record keeping firms, and others, who expect to receive at least $1,000 for their services. Certain service providers whose compensation is paid directly by the plan sponsor (e.g., an accounting firm that audits a 401(k) plan and is paid directly by the employer sponsoring the plan) may not have to comply.

Sponsors of plans subject to these requirements should contact their vendors to request confirmation that the vendor will deliver the mandatory disclosures on time. For vendors who claim they are not subject to the regulation, a plan sponsor should ask the vendor to explain, in writing, why the vendor is not a “covered service provider.” A plan sponsor wishing to reach out to its vendors could begin by reviewing its most recent Schedule C to Form 5500, which should provide at least a good starting point for a list of service providers that might fall into the regulation’s definition of “covered service provider.”

The U.S. Department of Labor considers these fee disclosures a critical component in the overall structure of fiduciary responsibility. The disclosures also support the participant-level disclosures that plan fiduciaries must distribute later this year (by August 30 for calendar year plans). Plan fiduciaries should keep track of the fee disclosures they receive and promptly follow up with vendors that have not provided the necessary disclosures but appear to be covered service providers under the regulation.