408(b)(2) Compliance Checklist: A Diagnostic Assessment for Plan Fiduciaries

ERISA Section 408(b)(2) imposes significant disclosure requirements on covered service providers. This diagnostic assessment provides a comprehensive checklist for responsible plan fiduciaries to evaluate whether they have received complete and compliant disclosures.

Required Disclosure Elements

A compliant 408(b)(2) disclosure must include:

1. A description of services to be provided
2. A statement of fiduciary status, if applicable
3. Direct compensation to be received
4. Indirect compensation to be received
5. Compensation paid among related parties
6. Compensation for termination of the arrangement
7. Manner of receipt for indirect compensation

Investment Disclosure Requirements

For investment-related services, additional disclosures are required:

• A description of compensation received in connection with investment alternatives
• Annual operating expenses for each designated investment alternative
• Ongoing expenses for each investment alternative
• Any issuer restrictions on participant investment

Recordkeeping Disclosure Requirements

If recordkeeping services are provided with indirect compensation:

• A description of all services to be provided in exchange for indirect compensation
• If applicable, the cost of recordkeeping services if paid directly

The Responsible Plan Fiduciary’s Obligations

Upon receiving disclosures, the responsible plan fiduciary must:

1. Review all disclosures for completeness
2. Request missing information from covered service providers
3. Determine if fees are reasonable for services rendered
4. Document the reasonableness determination
5. Monitor service providers on an ongoing basis

Compliance Checklist

When evaluating 408(b)(2) compliance, responsible plan fiduciaries should focus on:

• Identifying all covered service providers
• Reviewing all direct compensation arrangements
• Identifying indirect compensation sources
• Understanding revenue sharing arrangements
• Evaluating conflicts of interest
• Documenting the reasonableness determination
• Establishing ongoing monitoring procedures

Conclusion

Compliance with ERISA Section 408(b)(2) is independent of other fiduciary obligations under ERISA Section 404. A responsible plan fiduciary is encouraged to broadly interpret and apply the disclosure requirements to all service provider relationships to obtain comprehensive information before making a decision. The documentation created through this process serves as evidence of prudent fiduciary decision-making.