408(b)(2) Fee Certification

Rule 408(b)(2) has two main requirements:

  1. Your service provider must make certain disclosures regarding their fees, compensation and services;
  2. You must ensure that your service provider has accurately and fully disclosed the necessary information, that the services are necessary, and that the fees and compensation are reasonable.

While most are describing Rule 408(b)(2) as one of the new fee disclosure rules, it has been an ERISA requirement for many years. What is new is the amendment to Rule 408(b)(2). Plan sponsors have always had the fiduciary duty to: understand all fees being paid by their plan; identify all compensation received by their service providers; and to ensure that those fees and compensation were reasonable relative to the services being provided. However, what Rule 408(b)(2) did not require was for service providers to disclose all of their fees and compensation the plan sponsor needed in order to comply with Rule 408(b)(2).

Although common sense dictates that the DOL, or some state or federal agency, would be responsible to ensure that service providers provide all of the information required under the amended Rule 408(b)(2), this is not the case. Under the new rule, it’s the plan sponsor’s responsibility to ensure that its service provider complies with 408(b)(2)! This is akin to the hen asking the fox if the chicks are safe.

You can read about some of the significant challenges in fulfilling Rule 408(b)(2) here. Prudent Champion, Inc. in conjunction with the Centre for Fiduciary Excellence (CEFEX) can certify that your plan is in compliance utilizing our 408(b)(2) Fee Certification service.