Earlier this year, the U.S. Department of Labor issued final
regulations under ERISA Section 408(b)(2) that require
"covered service providers" to ERISA plans to disclose
the fees (direct and indirect) that they may receive in connection
with the services provided to the plan. While the majority of an
ERISA plan's service providers are record-keepers, actuaries,
and the like, it will be possible for the new disclosure rules to
apply to private investment funds or investment managers. If
applicable, the disclosures must be provided by July 1, 2012.
Failure to comply with these new regulations can result in
substantial penalties imposed on the fund, put valuable ERISA fund
investors in a difficult position, and jeopardize those client
relationships. Furthermore, ERISA plans are required to report
noncompliance with the disclosure rules to the Department of
Under the new rules, contracts or arrangements with an ERISA
plan will not be compliant if the service provider (typically an
investment manager or a fund GP) does not provide detailed written
disclosures to the ERISA plan in advance of entering into the
contract. The new rules apply to both existing contracts as well as
new contracts entered into after July 1, 2012. There also are
annual updating requirements. If you have not done so already, it
is important to take the time to review your dealings with ERISA
plan investors. While the language of the regulation can cover a
wide array of contractual agreements with plans, some of the more
common arrangements that are subject to the rules include managed
accounts or entities that have agreed to serve as a registered
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