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Direct, indirect fee information required under final DC disclosure rules


Defined contribution service providers will be required to provide more and clearer information on direct and indirect fees being charged to plan sponsors under final federal disclosure regulations announced Thursday.

According to a statement from the Labor Department, the new regulations would:

• require providers to describe all services “and all direct and indirect compensation” to be received by the provider, its affiliates or subcontractors;

• define “direct compensation” as compensation “received directly from the covered plan,” and define “indirect compensation” as “generally … compensation received from any source other than the plan sponsor, the (provider), an affiliate, or subcontractor.”

• require that written fee information from a service provider be given to “a responsible fiduciary” for a covered DC plan, though not a formal written contract “delineating the disclosure obligations;”

• require providers to identify the sources for indirect compensation, the services they cover, and details of terms “between the payer and (provider) pursuant to which indirect compensation is paid;” and

• disclose whether providers are offering record-keeping services and at what cost, even when no explicit charge is identified as part of the service package or contract.

The final rule stopped short of mandating that providers immediately deliver a summary statement of fees to the sponsors.

The DOL, in a fact sheet describing the final regulations, said it “strongly encourages” providers to offer a “guide, summary or similar tool” to assist sponsors in identifying all of the disclosures required.” The DOL has issued a sample guide for providers “that can be used on a voluntary basis,” the DOL said.

The Labor Department also said it intends to publish a proposed rule “in the near future under which covered service providers may be required to furnish a guide or similar tool to assist responsible plan fiduciaries' review of initial disclosures.”

Robert Steyer is a reporter for Pensions & Investments, a sister publication of Business Insurance.