The final ERISA section 408(b)(2)
regulation would provide relief for certain arrangements between
pension plans and service providers that ERISA section 406(a)(1)(C)
otherwise proscribes. To obtain this relief, the arrangement
between a plan and a service provider must satisfy several
criteria: the services must be necessary for the establishment or
operation of the plan and the plan may pay no more than reasonable
compensation for the services. The Department is also issue a
prohibited transaction class exemption in conjunction as part of
the final regulation. The class exemption grants plan fiduciaries
relief from liability for a prohibited transaction resulting from
the service providers failure to comply with section 408(b)(2).
The Department recognizes that a plan fiduciary may on occasion
unknowingly conclude a contract or arrangement that does not meet
the requirements of the regulation for relief under ERISA section
408(b)(2), in the reasonable belief that the service provider has
already divulged the requisite information. This act would
constitute a prohibited transaction by both the service provider
and the plan fiduciary, but for the availability of the class
exemption. Under the final regulation, for a contract or
arrangement to be reasonable, a potential service provider must
disclose to a pension plan fiduciary, in writing, certain
information before the plan may enter into, extend, or renew the
contract or arrangement. This required information comprises all
compensation the plan will owe the service provider under the
contract or arrangement. Failure to comply with the final
regulation would result in a prohibited transaction both under
ERISA section 406(a) (1) (C) and under section 4975(c) (1) (C) of
the Internal Revenue Code.
US Code:
29
USC 1108 Name of Law: Employee Retirement Income Security
Act
US Code: 29 USC 1108 Name of Law: Employee
Retirement Income Security Act of 1974
The Department issued this rule
under its own discretion and believes that the final rule will
enhance plan sponsors and fiduciaries understanding of the fees
for services that employee benefit plans pay, directly and
indirectly to service providers. Greater knowledge of such fees
among sponsors and fiduciaries will in turn increase efficiency and
competition in the service provider market, thereby generating
benefits to plans and, thus, to plan participants.
$0
No
No
Uncollected
Uncollected
Uncollected
Uncollected
Chris Cosby 202
693-8540
No
On behalf of this Federal agency, I certify that
the collection of information encompassed by this request complies
with 5 CFR 1320.9 and the related provisions of 5 CFR
1320.8(b)(3).
The following is a summary of the topics, regarding
the proposed collection of information, that the certification
covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a
benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control
number;
If you are unable to certify compliance with any of
these provisions, identify the item by leaving the box unchecked
and explain the reason in the Supporting Statement.