Monday, August 07, 2006

DOL Proposes ERISA Plan Vendors Disclose Outside Revenues

In July the DOL proposed a number of changes to the Form 5500. The Department has proposed modifying Schedule C reporting requirements in an effort to clarify them and to ensure that plans obtain the information they need to assess the reasonableness of the compensation paid for services rendered, taking into account revenue sharing and other financial relationships or arrangements and potential conflicts of interest that might affect the services provided.

The proposal would require a range of investment service providers to disclose information about all the revenues and compensation they receive in connection with providing services to ERISA plans. This requirement could mean that all revenue sharing agreements (12b-1's, sub TA fees, commisions , soft dollars) must be reported to ERISA plans. Currently, many providers decline to disclose this information. Under the proposal, service providers who do not disclose this information must be identified and reported to the DOL. To emphasize the fiduciary responsibility to understand and control costs the DOl comments:

The Department believes that an annual review of such expenses is part of a plan fiduciary’s on-going obligation to monitor service provider arrangements with the plan. Requiring the reporting of such information
should emphasize that monitoring obligation.


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