DOL proposed regulation on 408(b)(2) 'guide': impact on service providers

The Department of Labor (DOL) has issued its long-anticipated proposal to amend the 408(b)(2) regulation. If adopted, the proposal will require covered service providers to furnish responsible plan fiduciaries (referred to as "plan sponsors" for simplicity) with a guide to their disclosures. This article discusses the proposed regulation and its impact on the four major categories of covered service providers: recordkeepers, broker-dealers, registered investment advisers, and third party administrators. The guide, as described in the DOL's proposal, would be a short (probably one- or two-page) index to the disclosures required by the 408(b)(2) regulation that became effective in 2012. The DOL is concerned that some covered service providers are using lengthy or multiple documents for their disclosures, making it difficult for small- and mid-sized plan sponsors to review those documents and find the essential terms of the service arrangement (the "kernels" of disclosure).