Co-authored by Christopher K. Buch.

The United States Department of Labor (DOL) released a direct final rule on July 13, that amended the procedures retirement plan fiduciaries are to use for reporting a covered service provider’s (CSP’s) failure to furnish the newly required disclosures related to the CSP’s compensation and possible conflicts of interest.

In February of this year, the DOL issued a final rule under Section 408(b)(2) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), effective July 1, 2012, for both existing and new contracts and arrangements between covered plans and CSPs. The final rule requires CSPs to provide responsible plan fiduciaries with the information that they need to:

  • Assess the reasonableness of total compensation received by the CSP, its affiliates and/or subcontractors;
  • Identify potential conflicts of interest; and
  • Satisfy reporting and disclosure requirements under Title I of ERISA.

Under the final rule, if a plan fiduciary does not receive these disclosures, the plan has engaged in a prohibited transaction under ERISA, and a related excise tax under Section 4975 of the Internal Revenue Code may apply. The final rule contained a class exemption from the prohibited transaction if the plan fiduciary notified the DOL of the CSP’s failure to provide such disclosure.

The direct final rule issued on July 13 amends the regulations under Section 408(b)(2) of ERISA by revising the postal address to which the notification must be mailed, and by providing a website and related web-based submission procedures a plan fiduciary may use to electronically file such notice.

Under the direct final rule, effective September 14, 2012, the DOL will eliminate the previously available email address for notification submissions, and will instead provide a dedicated link on the DOL’s website, where fiduciaries may electronically submit the notifications. The new dedicated link can be accessed here. The DOL stated that the web-based submissions will provide immediate confirmation to plan fiduciaries that their notice has been received.

Also, under the direct final rule, the DOL announced that a dedicated post office box address has been established by the DOL to receive mailed notifications. This new post office box is to replace the original mailing address set forth in the regulations. The new mailing address is:

U.S. Department of Labor, Employee Benefits Security Administration, Office of Enforcement
P.O. Box 75296
Washington, DC 20013

The DOL said the new direct final rule will become effective September 14, 2012, without any further action or notice, unless the DOL receives significant adverse comments by August 15, 2012. If the DOL receives significant adverse comments, the DOL will publish a timely withdrawal notice in the Federal Register.

A copy of the direct final rule can be found here.