Changes to Small Business Retirement Plans

 With the upcoming implementation of the new 408(b)(2) regulations, it will be more important than ever for a company sponsoring a retirement plan to be organized and in compliance. As part of the government's response to the financial crisis, there will be a whole new layer of disclosures and required record keeping.

 What is 408(b)(2)?

 The Department of Labor (DOL) Employee Benefits Security Administration (ERSA) requirements under the Employee Retirement Income Security Act (ERISA) mandates a disclosure obligation designed to ensure that ERISA plan fiduciaries are provided information they need to make better decisions when selecting and monitoring their retirement plan service providers.

408(b)(2) permits the payment of service providers from plan assets provided that the services are necessary for plan operations and the fees are reasonable. 408(b)(2) regulations also require that the services be provided under what the regulations calls a "reasonable arrangement." Under the new 408(b)(2) requirements, all covered service providers must disclose certain information in writing to be compliant. They must: specifically state the services to be provided, state all direct and indirect compensation received, and include a statement advising which services create a 'fiduciary' status under ERISA and compensation for termination.

How it affects Business Owners/Plan Sponsors

408(b)(2) Fee Disclosure Requirements create Fiduciary Standards and Fee Transparency that are the direct responsibility of the Business Owners/Plan Sponsors. Non-compliance with the regulation's requirements can be costly.

• Fiduciary Standards and Fee Transparency creates new challenges for businesses. Products, services, and fee benchmarking becomes critical as standards and fee transparency requirements are implemented. Plan sponsors must be prepared - from plan structure to the way employees are communicated with and instructed regarding plan participation, to employee questions about the plan, to the actual investment options selected.
• DOL's fee transparency initiatives translate into a more challenging audit environment. The DOL will engage additional auditors for the specific purpose of ensuring compliance with the new fee disclosure regulations. With increased transparency/possibility of audit, plan sponsors will need impeccable record keeping.
• What Non-Compliance may mean for you. Failure to comply with regulatory requirements could lead to tax penalties and other fines

If you have any questions or would like more information, please contact Fred Schutz at 856-722-5300 ext. 201 or Dave Gill at ext. 210.

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