The Clock is Ticking: 408(b)(2) Audit Season and Tussey v. ABB

The anxiety over distributing 408(b)(2) disclosures by July 1, 2012 now seems like a distant memory. Covered Service Providers (CSPs) of all sorts prepared disclosures that either identified expenses for services not previously disclosed or they prepared disclosures that referenced documents previously distributed.

What was intended to provide a Responsible Plan Fiduciary (RPF) with “comprehensive information about the services that are provided to employee benefit plans, and the cost of those services” may have met the letter of the law, but has it helped an RPF “satisfy their fiduciary obligations under ERISA section 404(a)(1)?”

Fees May Be Reasonable But…

Fees may be reasonable but if the disclosures are not complete, the exemption is lost. There seems to be more consternation on the part of CSPs than RPFs who are concerned that their disclosures may be found to fall short.

Its Audit Season

This CSP anxiety is magnified in anticipation of the 2013 audit season and the potential obligations imposed by Judge Laughreys decision in Tussey v. ABB. According to the AICPA Audit and Account Guide for Employee Benefits Plans, materiality is a non-issue when it comes to a prohibited transaction regardless of amount.

Tussey v. ABB Setting New Standards

Last year we saw a landmark trial order issued on March 31, 2012, in Tussey v. ABB. The implications of this decision affects not only RPFs in the 8th Circuit, it also affects risk mitigation strategies for any plan sponsor nationwide. At this point, to ignore Judge Laughreys conclusions is a risky proposition.

The DOL and plaintiff firms will be evaluating the 2012 audit results for trends and vulnerabilities among RPFs and CSPs for targeting DOL audits and plaintiff litigation activity in 2014.