The U.S. Department of Labor (DOL) has finalized its regulation
detailing the steps retirement plan fiduciaries and many service
providers must take to avoid engaging in nonexempt prohibited
transactions after June 30, 2012.
Overview
The Employee Retirement Income Security Act (ERISA) and the
Internal Revenue Code (Code) generally prohibit using plan assets
to directly or indirectly pay for services to an employee pension
or welfare benefit plan, but section 408(b)(2) of ERISA affords an
exemption for any contract or reasonable arrangement for necessary
services "if no more than reasonable compensation is paid
therefor." The regulation specifies that a service arrangement
between a "covered plan" and a "covered service
provider" won't be reasonable and cannot qualify for the
statutory exemption unless the new fee disclosure requirements are
satisfied.
