CHICAGO (June 22, 2012)— It should not come as a surprise to anyone that fee disclosure was a recurring topic at the 2012 Great Lakes Benefits Conference in Chicago.
Jeffrey J. Turner, Esq., deputy director of the Office of Regulations and Interpretations at the Department of Labor (DOL) put us on notice that DOL will be looking at Employee Retirement Income Security Act (ERISA) accounts. An ERISA account (also known as an ERISA budget) is an account set aside to hold funds and/or collect 12b-1 and similar fees that will be used to pay plan expenses. Because ERISA accounts are not defined in ERISA, it’s unclear how they will be regulated. Some believe that ERISA accounts should be considered plan assets no matter what the intent was at the time of their establishment. If the Employee Benefits Security Administration (EBSA) officially makes this determination, it will beg the question: How do you properly administer and account for the assets held in the account?
Another important issue discussed in Mr. Turner’s session was the initial need for disclosure by a covered service provider if it’s anticipated that the plan will pay the covered service provider at least $1,000 over the term of the engagement. The issue of attempting to structure a contract between the covered service provider and the employer to avoid the $1,000 reporting threshold was raised in the session. Mr. Turner indicated that EBSA will be closely auditing these attempts and will look to the substance of the transaction. Covered service providers should review their engagements considering the services performed, their perceived status, compensation, and to whom they owe the duty of disclosure.
Mr. Turner also made an important point that may be missed by practitioners: Compensation in the case of a covered service provider includes reimbursement of expenses when determining the $1,000 threshold for purposes of the disclosure requirements of 408(b)(2).
—Lanning R. Hochhauser, Esq., MBA.
DATAIR Employee Benefit Systems, Inc.
ASPPA Member since 1997
Category: Member Focus