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Service Provider Compensation Disclosures - New Rules, New Scrutiny

According to Attorney Fred  Reish, Managing Director at Reish & Reicher, the "word on the street" is that the new 408(b)(2) regulation - sent from the U.S. Department of Labor to the Office of Management and Budget on March 3 - will be an "interim final regulation and will have a delayed effective date." He adds that "effective" refers to the date on which people must begin complying with its terms. ERISA attorney Reish adds that:

My sense is that the delayed effective date will be somewhere between January 1, 2011 and 12 months after the regulation is issued. However, that is just a guess. That effective date would probably apply only to new plan clients. That is, there would probably be a transition period for existing  plan clients. Also, it is not yet clear whether the regulation will apply to individual retirement accounts, but it could."

For background on this important disclosure rule, see "The DOL's Proposed 408(b)(2) Regulation: Impact of the Mandated Disclosures on Registered Investment Advisers (RIAs)" by Fred Reish, Bruce Ashton and Debra Davis (February 2008).

Also see "Private Pensions: Additional Changes Could Improve Employee Benefit Plan Financial Reporting" (United States Government Accountability Office, December 2009).

I will post further information about fees paid to plan service providers in coming weeks.

Disclosure: No positions