New Fee Disclosure Regulations:
Does your administrative services agreement have you covered?
After analyzing, dissecting and dreading the new DOL fee disclosure rules for what seems like forever, the final regs are now here. And while we know that you have probably sat through multiple webcasts, poured over numerous articles and discussed the topic with your consultants and legal counsel several times, if you’re like many plan sponsors we know, your focus has likely been on figuring out which providers need to report compensation to you, what information they need to provide, what in turn you need to disclose to participants, and how you are going to do that.
Because 408(b)(2) requires covered service providers to produce the “raw” compensation and services information, your vendors have almost certainly been planning for the new regs as diligently as you have been. But since you’ll be on the hook if your service providers don’t deliver their data timely, as you’re working with them to prepare for the rollout of the new disclosures, we would suggest that you also take a moment to review your service agreements to make sure that you have the terms in place to hold your vendors accountable for their delivery of the required information.
You may find that the provisions of your agreements are broad enough so that they could be construed to cover the new regs (for example, if your recordkeeping contract contains an obligation for your vendor to comply with all applicable laws and regulations). But even in this case, it may be worth considering explicit amendments to your agreements to specify your vendor’s new obligations. For your main recordkeeping agreement, this might at a minimum include updating the contract’s Statement of Work to specify not only the information that will be provided to you and your participants, but also the timing of its delivery. You might further add language echoing the regulations’ obligations for covered service providers to correct any errors or omissions made in prior disclosures within 30 days of the vendor’s discovery of the error or omission, and extend that to requiring your administrative services provider to reissue a corrected participant disclosure statement when applicable.
Good vendor relationships involve an element of trust, but clearly defined roles and responsibilities promote accountability. So review your agreements with a single question in mind: Is there any room to debate what my vendor needs to do for me so that I can be in full compliance with the new fee disclosure regs? If the answer is, “Yes” or even “Maybe,” then consider amending your agreement to state obligations (and consequences for failing to meet them) more clearly. It’s always preferable to have an airtight contract to fall back on should the need arise.
Of course, here comes the requisite disclaimer: Hager Strategic is not a law firm, so please take this for what it is – just some thoughts to consider and potentially discuss with your legal counsel.
Have you already updated your agreements for the new regs? If so, let us know what you changed and why. We’d love to hear from you!