In prior entries, we have discussed a variety of issues related to the fee disclosure responsibilities of broker/dealers and financial advisors. This month, we’ll address the impact of the 408(b)(2) disclosure regulations on third party administrators.
Unlike broker/dealers and financial advisors, who often don’t have written agreements with their retirement plan clients, TPAs have historically described the services that will be provided and the fees that will be charged for such services in their client service agreements.
At that point, it will be too late to provide disclosure. The disclosure was required to be provided reasonably in advance of entering into the arrangement. As such, it would be better to err on the side of “unnecessary” disclosure rather than risk both client relations issues and potential prohibited transactions.
Another issue relates to compensation paid to the TPA by a service provider, such as an insurance company or a mutual fund provider. This compensation is typically paid for services the TPA provides either directly to the service provider in connection with mutual client plans or to the plans themselves on the service provider’s behalf.