Identifying Plan Fiduciaries Under ERISA Section 408(b)(2)

Before 2010 ended, the Department of Labor issued final regulations under Employee Retirement Income Security Act Sections 404(a) and 404(c) requiring the disclosure of investment and expense information to plan participants. Issuing regulations addressing participant level disclosures fulfills the DOLs promise to regulate qualified plan fee disclosures using a three-pronged approach.

The Three-Pronged Approach

1. 2007: DOL imposed additional annual reporting requirements on approximately 71,000 retirement plans obligated to file a Schedule C with their annual Form 5500
2. July 2010: DOL released interim final regulations addressing the disclosure of service provider compensation before and during engagements
3. October 2010: Final regulations dictating disclosure obligations to plan participants

It should now be abundantly clear the retirement industry must operate under a new regulatory environment of explicit, non-optional, and nonnegotiable obligations to disclose more information than ever before.

Identifying the Responsible Plan Fiduciary

Failure to comply with the new requirements could result in monetary damages, penalties, and potential prohibitions from providing services of any kind to a retirement plan. Personal and corporate assets are at risk for plan sponsors, their fiduciaries, and service providers.

With the stakes raised to a new level, it will be imperative for plan sponsors to identify those individuals with fiduciary authority and to inform service providers of their identity so they, in turn, know who to communicate with to meet their disclosure obligations.

ERISA Section 408(b)(2) dictates that service providers will be responsible for delivering the required disclosures to the “responsible plan fiduciary.” This will require a service provider to take a proactive role in determining the identity of the responsible plan fiduciary.