The Department of Labor ("DOL") announced on February 11, 2011 that it will extend the applicability date for the new financial disclosure rules under Section 408(b)(2) of the Employee Retirement Income Security Act from July 16, 2011 to January 1, 2012.

The DOL published interim-final regulations on July 16, 2010, which generally require retirement plan service providers to disclose the fees (both direct and indirect) charged for their services so that plan fiduciaries can assess (a) the reasonableness of fees being charged for plan services and (b) any potential conflicts of interest that might affect the quality of those services. The new requirements had been scheduled to apply to service contracts or arrangements in existence on or after July 16, 2011.

In announcing the extension of the applicability date, the DOL indicated that further guidance, including the possibility of final regulations and of a model summary document, would be forthcoming. According to a DOL official, the extension will ensure that the DOL has sufficient time "to get the final rule right and that plans and their service providers have the time they need to undertake orderly and efficient compliance efforts following publication of the final rule."

With this extension, the new service provider fee disclosures will be required at the same time that plan fiduciaries will be required to comply with the new disclosure rules for participant-directed individual account plans (i.e., January 1, 2012 for calendar-year plans). (See our November 4, 2010 E Flash on this issue, "DOL Finalizes New Fee and Investment Disclosure Rules for Participant-Directed Plans.")

Although the applicability date has been extended, service providers and plan fiduciaries should be developing strategies for complying with the new rules. For service providers, this includes developing procedures for (a) determining if the services they provide are covered by the final regulations, (b) preparing disclosure materials, and (c) furnishing disclosure materials before entering into service contracts/arrangements. For plan fiduciaries, this includes developing procedures for (a) tracking disclosures they should be receiving, and (b) analyzing disclosures received.

If you have any questions regarding the effective date or the interim-final regulations, please contact one of the members of the Reed Smith Employee Benefits team listed to the right or the Reed Smith attorney with whom you regularly work.

Client Alert 2011-041