Improved Fee Disclosure for Welfare Plans
EBSA plans to enhance retirement security and bring transparency to service provider arrangements with group health and other welfare benefit plans by ensuring that plan fiduciaries have the comprehensive information they need to assess the reasonableness of the compensation being paid for plan services, as well as to assess potential conflicts of interest on the part of plan service providers, ultimately supporting the Secretary's good jobs for everyone policy.
Key Action: Proposed Regulation
The Department's EBSA plans to publish a proposed regulation in March 2011 that will define the specific information that must be disclosed by service providers to group health and other welfare plans about the compensation they will receive, and possible conflicts of interest that may affect their provision of services.
Key Concern and Issues to be Addressed
This rulemaking is necessary to clarify and improve the information that service providers furnish to sponsors of welfare plans, enhancing the ability of plan sponsors to make prudent, informed decisions in compliance with the Employee Retirement Income Security Act's (ERISA) fiduciary requirements. The rule creates an incentive for service providers to be forthcoming by subjecting those who fail to disclose the required information to civil penalties.
Recent changes in the way services are provided to welfare benefit plans have made it more difficult for plan fiduciaries to understand how service providers are compensated and whether possible conflicts of interest may affect their performance.
Under ERISA, plan fiduciaries are obligated to act prudently when selecting service providers and investment options for their plan. They also must ensure that no more than reasonable compensation is paid for plan services, taking into account all of the compensation that will be received by service providers. EBSA is nearing completion of a similar disclosure rule applicable to pension plans.
This rule, when adopted, will require that service providers to welfare plans disclose specific information about the compensation they will receive, both directly from the plan and indirectly from third parties, and potential conflicts of interest in order to satisfy ERISA's "408(b)(2)" statutory exemption for the provision of services to a plan. The rule will also include an ongoing requirement that service providers disclose information to assist the plan's administrator in complying with ERISA's reporting and disclosure requirements. Service providers who do not comply with the rule will be subject to civil penalties for failing to meet this statutory exemption.