According to the document released this morning by the Employee Benefits Security Administration (EBSA), the interim final rule is effective on July 16, 2011. However, EBSA is encouraging comments on the interim final rule during a 45-day comment period following publication of the rule.
According to EBSA, the final 408(b)2 regulation differs from the proposal in a number of significant respects:
First, unlike the proposal, the final rule does not require a formal written contract or arrangement delineating the disclosure obligations, even though the disclosures must be made in writing. EBSA notes that the final rule focuses instead on the substance of the disclosure that must be provided.
Second, the final rule treats pension and welfare plans separately, with Paragraph (c)(1) of the rule published today providing disclosure requirements applicable to contracts or arrangements with pension plans, including defined contribution programs (the rule notes that DoL reserves paragraph (c)(2) of the rule for future guidance on disclosure with respect to welfare plans).
Third, the final rule modifies the categories of service providers that must comply with the disclosure requirements, including fiduciaries, investment advisers, and recordkeepers or brokers who make investment alternatives available to a plan – noting that it also applies to “providers of other specified services who receive either “indirect compensation” (generally from sources other than the plan or plan sponsor) or certain types of payments from affiliates and subcontractors”. The final rule includes in its definition of “covered service providers” fiduciaries to investment vehicles that hold plan assets and in which a covered plan has a direct equity investment. However, DoL notes that the definition makes clear that furnishing non-fiduciary services to such vehicles, or services to vehicles that do not hold plan assets will not cause a person to be a covered service provider. In addition, the regulation requires fiduciaries to plan asset investment vehicles in which plans make direct equity investments, as well as parties that offer designated investment alternatives to a participant-directed individual account plan as part of a platform, to furnish investment-related compensation information.
Fourth, the final rule, unlike the proposal, does not contain specific narrative conflict of interest disclosure provisions, but rather relies on full disclosure of the circumstances under which the covered service provider will be receiving compensation from parties other than the plan (or plan sponsor), the identification of such parties, and the compensation that is expected to be received. DoL says it is “persuaded that plan fiduciaries will be in a better position to assess potential conflicts of interest by reviewing these specific parties and the actual or expected compensation to be received from such parties.”
Fifth, the final rule includes a new provision requiring that certain providers of multiple services disclose separately the cost to the covered plan of recordkeeping services.
Sixth, the final rule specifically addresses the application of the requirements of the regulation to section 4975 of the Internal Revenue Code (the Code).
Lastly, the exemptive relief for plan sponsors or other responsible plan fiduciaries, originally proposed as a separate exemption, is now incorporated into the final rule “for ease of reference and consideration by interested parties”.
The text of the interim final rule is available at http://www.ofr.gov/OFRUpload/OFRData/2010-16768_PI.pdf
To facilitate the receipt and processing of comments, EBSA encourages interested persons to submit their comments electronically to e-ORI@dol.gov, or by using the Federal eRulemaking portal http://www.regulations.gov (following instructions for submission of comments).
EBSA notes that persons submitting comments electronically are encouraged not to submit paper copies. Persons interested in submitting comments on paper should send or deliver their comments (preferably three copies) to: Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, U.S. Department of Labor, 200 Constitution Avenue, NW, Washington, DC 20210, Attention: 408(b)(2) Interim Final Rule.
All comments will be available to the public, without charge, online at http://www.regulations.gov and http://www.dol.gov/ebsa , and at the Public Disclosure Room, Employee Benefits Security Administration.
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