4147 / Do the final DOL 408(b)(2) regulations provide any protection for a responsible plan fiduciary if a covered service provider does not provide the required disclosures?

In addition to requiring covered service providers to disclose their compensation and service arrangements, a responsible plan fiduciary is responsible for collecting these disclosures from service providers. The regulations provide an exemption permitting a responsible plan fiduciary to escape prohibited transaction liability if a covered service provider does not provide the required disclosures.

For a responsible plan fiduciary to be exempt from the prohibited transaction rules under these disclosure regulations, a plan fiduciary must not know that a covered service provider failed to provide complete disclosure. If a fiduciary discovers that a covered service provider has not fully disclosed its compensation arrangements, a responsible plan fiduciary must request that the covered service provider make full and complete disclosures. If, after 90 days after the date of the request, the service provider has failed to comply with the disclosure request, the responsible plan fiduciary then is required to report the failure to comply with the disclosure requirements to the DOL within 30 days of the service provider’s refusal to comply with the request, or 90 days after the request for complete disclosure was made.

On the failure or refusal to respond to the request for disclosure, the responsible plan fiduciary must evaluate the nature of the failure, the availability, qualifications, and cost of replacement service providers, and the covered service provider’s response to notification of the failure.

Planning Point: If the requested information relates to future services and is not disclosed promptly after the end of the 90-day period, the responsible plan fiduciary is required to terminate the arrangement with the covered service provider prudently and as soon as practically possible.