The risk arises partially in connection with the disclosures plan fiduciaries receive from their service providers under Department of Labor (DOL) regulations for Employee Retirement Income Security Act (ERISA) 408(b)(2), which became effective July 1. Now that plan sponsors are receiving the disclosures, they must ensure that they have the right disclosures and then must evaluate them, CEFEX noted.
The new assessment service from CEFEX, called the “Service Provider Disclosure Review” and offered in consultation with the firm Drinker Biddle & Reath LLP (DBR), is designed to address both of these requirements. The assessment uses a detailed checklist to determine whether the plan sponsor has arrangements with service providers, such as advisers and recordkeepers, which are fair and reasonable. The assessment is performed by an independent CEFEX Analyst and can result in the issuance of a legal opinion letter from the law firm.
“Failure by the plan sponsor to take the actions prescribed by the regulation if the disclosure requirements are not satisfied will result in a prohibited transaction and possibly a fiduciary breach,” stated Fred Reish, a partner at DBR. “Plan zponsors must be prepared to deal with the complexity of these requirements and should seek the assistance of independent experts who can help them with the evaluation process.”More information is here.