408(b)(2) Disclosure Regulations Effect Date Delayed to July 1, 2012
Posted on Mon, Feb 06, 2012
The Employee Benefits Security Administration (EBSA) is expected to release final 408b-2 regulations in tomorrow’s Federal Register. In addition to removing the “Interim” tag on the regulations, a few changes were made to the disclosure rules, most importantly, the effective date for compliance was moved back to July 1, 2012.
The following are some of the newest changes to what have been referred to as the “reasonable contract” regulations:
- Certain 403(b)s excluded from the requirements. Must have been issued to employees prior to 1/1/2009, the employer ceased making contributions, individual employees can enforce contracts without employer’s involvement, and individuals are fully vested.
- Reporting of indirect compensation. The service provider must describe any arrangement between the payer and the service provider so that the fiduciary can understand why the payer is compensating the service provider.
- Investment-related disclosures. Service providers may comply with requirements regarding the investment-related disclosures by providing current disclosure materials of the investment issuer (like a mutual fund’s prospectus) as long as the institution issuing the disclosure materials is regulated (previously the materials themselves, not the institution, had to be regulated).
- Fiduciary action upon service provider failure to disclose. If the service provider fails to provide disclosures within 90 days of the fiduciaries’ written request the fiduciary must determine whether or not to terminate the contract consistent with its duty of prudence. If the information relates to future services and is not promptly disclosed after the 90 days, the fiduciary must terminate the arrangement “as expeditiously as possible.”
- Effective dates delayed. The new effective date for the service provider disclosures to plan fiduciaries is now July 1, 2012. Because the new participant-level disclosure regulations’ effective date is predicated upon the 408b-2 effective date, the initial disclosure is now pushed back to end of August and the first quarterly statements that must comply with the new participant disclosure rules will have to be delivered by November 14th (for calendar year plans).
If you have questions, or would like to talk with a consultant about how this affects you, please contact Greg Peterson at (303) 645-4713 or gpeterson@bigroupinc.com.
This alert is brought to you by Benefits & Incentives Group, in conjunction with the Retirement Plan Advisory Group.
