Compliance

Plan Sponsors to Face New Responsibilities Under 408(b)(2)

By Tara Cantore editors@plansponsor.com | February 22, 2012
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February 22, 2012 (PLANSPONSOR.com) – The Department of Labor's (DoL) final 408(b)(2) regulation will bring a slew of new responsibilities for plan sponsors.  

During a webinar, Ronald E. Hagan, president and CEO of Roland|Criss, explained the implications the final regulation will have on plan sponsors.

The disclosure rule is effective on July 1, 2012. Vendors of services, including investments advisers, recordkeepers, third-party administrators, mutual funds and bank custodians must make full and complete written disclosure of their fee structures to their clients by September 1, 2012. The vendors must also reveal any relationships they have with other providers and what types of services they provide.

By the end of their current plan year, plan sponsors will need to have gone through the exercise of taking into account the fees they are paying, determine the quality of their service and make a report among themselves that they have considered the reasonableness of the fees.

In order to comply with the regulation, plan sponsors will need to verify receipt of appropriate disclosures from vendors; examine the disclosures to ensure that they are adequate; and determine by an auditing process that the fees provided within the disclosure are reasonable. According to Hagan, the latter two requirements are a significant adjustment for plan sponsors.

During the webinar, Hagan spoke with John Vazquez, director of administration and fiduciary committee chairman at Sherwin Alumina Company. Vazquez explained the process his company went through over the past several years in regards to examining the company’s plans and providers.

“In the course of examining our plans and provider, we discovered that we had some questions on performance,” said Vazquez. “As the legislation [408(b)(2)] began to develop, we began to ask questions about our fees, how they were determined and how they were allocated. We found it quite difficult to get straight answers to those questions.”