The U.S. Department of Labor has published the highly anticipated, and slightly overdue, final regulation imposing new obligations for fiduciaries of retirement plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). The obligations pertain to the collection and evaluation of disclosure information from plan service providers and include several minor modifications. The final rule also further extends the rule’s effective date from April 1 to July 1, 2012.

Delaying the effective date for the final rule also means that the related DOL regulation pertaining to the new affirmative fee disclosures that retirement plan fiduciaries must make to plan participants will be delayed until August 30, 2012. Although the deadlines for both of these regulations have been pushed back, employers should be preparing now to comply.

The DOL published the interim final rule on July 16, 2010. It requires fiduciaries responsible for selecting service providers for retirement plans (i.e., investment managers, record keepers, and other service providers that receive indirect compensation) to consider new information disclosures provided by existing service providers before deciding whether to retain or terminate the service providers. Following the effective date, fiduciaries will need to receive these disclosures from covered service providers and will need to make similar retention decisions prior to entering into, extending, or renewing a contract or arrangement with providers.

The required disclosures include information about the nature of the services to be provided, the extent to which the service provider is acting as a fiduciary, and the amount and type of compensation the service provider will receive. A fiduciary that fails to consider the new information disclosures will cause the retirement plan to engage in an ERISA-prohibited transaction.

The final rule is different from the interim rule in that it:

      • Excludes from the final rule section 403(b) annuity contracts and custodial accounts issued to affected employees before January 1, 2009, where the sponsoring employer ceased making contributions, where rights or benefits of individual owners of the contracts or accounts are enforceable against the insurer or custodian without employer involvement, and where such individual owners are fully vested in benefits provided under the contract or account
      • Expands the disclosure of "indirect compensation" to include a description of the arrangement made between the payer and the service provider
      • Aligns the investment-related disclosures to those required by the participant-level disclosure regulations
      • Provides a sample guide that service providers may give to fiduciaries to assist with their review of required disclosures and indicates that the DOL intends to propose new regulations that will make providing such guides mandatory in the future

Notwithstanding the short delay in the effective date, fiduciaries should be preparing now to comply with the new disclosure regulations. Fiduciaries should:

      • Become educated about the new fiduciary disclosure obligations
      • Contact plan service providers to obtain the required disclosure information
      • Review and evaluate information disclosures
      • Make and carry out fiduciary decisions

Ballard Spahr’s Employee Benefits and Executive Compensation Group will continue to follow these changes affecting fiduciaries of retirement plans as well as other ERISA developments. If you have any questions about the final regulation or what action your organization should take to comply, please contact Brian M. Pinheiro at 215.864.8511 or


Copyright © 2012 by Ballard Spahr LLP.
(No claim to original U.S. government material.)


All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.