A Higher Standard
The Employee Benefits Security Administration issued a final regulation requiring compensation and fee arrangement disclosures by service providers of pension plans and entities holding plan assets that are governed by the Employee Retirement Income Security Act (ERISA). The purpose is to provide greater information to plan fiduciaries, so they can properly assess the reasonableness of service contracts and identify conflicts of interest. However, by ensuring that fiduciaries receive certain information, the regulation creates an expectation that fiduciaries will use the information and thus sets a baseline standard for the exercise of fiduciary duties.
The requirements are effective July 1, 2012, and apply to arrangements entered into both before and after July 1. They come in the wake of the shift in recent decades from defined benefit to defined contribution plans, decreased investment returns b