408(b)(2) Compliance


Posted on June 7, 2012, by Fred Reish in 408(b)(2), DOL Activity, fiduciary, Service Providers. Comments Off on 408(b)(2) Compliance

As you know, I have done a series of short articles about overlooked and misunderstood issues for 408(b)(2) compliance. This article continues that series.

In our experience, many covered service providers are going to rely on electronic disclosure. One form of electronic disclosure is to notify the responsible plan fiduciaries that they can access information on a website. However, we are concerned that some service providers are taking risky compliance positions by referencing websites without providing a clear explanation of the disclosed information that is available on the website and without providing clear instructions on how to find the information on the website.

For example, we have heard that some providers are considering making references to the Statements of Additional Information for mutual funds by simply directing responsible plan fiduciaries to the general website address for the Securities and Exchange Commission. That may be problematic considering the DOL’s admonition in the preamble to the final 408(b)(2) regulation:

“Consistent with the views expressed in the 2007 proposed rule, there is nothing in the regulation that limits the ability of covered service providers to furnish information required by the regulation to responsible plan fiduciaries via electronic media.  However, unless the covered service provider’s disclosure information on a Web site is readily accessible to responsible plan fiduciaries, and fiduciaries have clear notification on how to gain such access, the information on the Web site may not be regarded as furnished within the meaning of the regulation.” [Emphasis added.]

As a result, if websites are going to be used to satisfy the 408(b)(2) disclosure requirements, the covered service provider should take steps to clearly reference the information to be disclosed and to instruct the responsible plan fiduciaries on how to access the specific information on the website.

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