This is the second in a series of Technical Updates explaining the recently released DOL regulations relating to service provider contracts with plans. This Technical Update discusses the plans and service providers covered by the regulations.

Q-1: What plans are subject to the new service provider fee disclosure regulations?

The regulations apply to “employee pension benefit plans," also referred to as “pension plans," as defined by Title I of ERISA. A pension plan includes all qualified plans (both defined contribution and defined benefit) and 403(b) plans subject to Title I. The size of the plan, and whether the plan provides for participant-direction of investment, are irrelevant. A plan subject to the regulations is referred to as a “covered plan."

Q-2: What plans are not subject to the new regulations?

The regulations do not apply to plans that are exempt from Title I: governmental plans, non-electing church plans, plans maintained solely to comply with applicable workmen’s compensation, unemployment compensation or disability insurance laws, “foreign" plans, and unfunded excess benefit plans. In addition, the regulations do not apply to owner-only plans and deferral-only 403(b) plans that satisfy the DOL regulatory Title I exemption for 403(b) plans with limited employer involvement. Finally, the regulations themselves specifically exempt IRAs, SEPs and SIMPLE IRAs.

Q-3: Are welfare plans subject to the new regulations?

No. The DOL decided to exclude welfare plans from the reach of the regulations. The DOL recognizes that there are “significant differences" between service and compensation arrangements of welfare plans and those of pension plans, and intends to develop separate “more specifically tailored" disclosure requirements for welfare plans.

Q-4: Are nonqualified plans subject to the new regulations?

Although not expressly exempted from the regulations, the regulations apparently do not apply to nonqualified plans. While nonqualified plans are not exempt from Title I, they are exempt from many provisions of Title I, including the fiduciary responsibility and prohibited transaction provisions. Since the new regulations interpret the “necessary services" statutory exemption from the prohibited transaction rules, the regulations have no application to nonqualified plans.

Q-5: What service providers are covered by the regulations?

A “covered service provider" is a service provider that: (1) enters into a contract or arrangement with a covered plan; (2) reasonably expects to receive $1,000 or more in direct or indirect compensation; and (3) provides services to the plan in one of the categories described in the regulations. A service provider is a covered service provider even if the services are performed by an affiliate or a subcontractor.

Q-6: What are the described categories of services?

The described services are under three general categories: (1) services as a fiduciary or registered investment adviser; (2) certain recordkeeping or brokerage services; and (3) other services for indirect compensation. The next Technical Update in this series will explain the three categories of covered service providers.

Advanced Pension Conference – Chicago, August 30 – September 1, 2010
The new fee disclosure regulations that the DOL has issued this summer will impact most retirement plans and will require revisions to service provider agreements with the plan. The Chicago Advanced Pension Conference will provide practical insight into the new regulations. The conference will also address other topics such as Designing fee agreements, Schedule C case studies, Troubleshooting EFAST2, Hot Topics in Plan Corrections, and Cash Balance Plans for DC Practitioners. Click here for more information.

ERISA Workshop 2010 to Focus on New Service Provider Regulations
The focus of this year’s ERISA Workshop is indeed on ERISA, as the workshop will look in-depth at the new regulations mandating disclosure from service providers to plan administrators. We’ll show you how to know if you are subject to the new rules and what you must do to comply (and what happens if you don’t). We’ll also analyze the rules in terms of modern business practices and revenue models. Of course, this seminar will also keep you up-to-date on all other recent changes in tax rules, and important developments affecting qualified plans. With the new service provider regulations, this seminar is a “must attend" for all those servicing retirement plans. Registration is now open, go here.