Proposed Regulations Expand Conditions To Exemption For Provision Of Services To Plans Subject To ERISA

February 1, 2008

On December 13, 2007, the Department of Labor proposed new regulations that define “reasonable contract or arrangement” for purposes of the statutory exemption contained in Section 408(b)(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). This exemption permits a party in interest to receive compensation for rendering services to a plan subject to the fiduciary responsibility provisions of ERISA. The new proposal greatly expands the necessary disclosures to be provided by the service provider to the plan fiduciary in order for this exemption to apply.

While it was initially assumed that the proposal imposed disclosure requirements only on persons that provide services to plans or plan asset vehicles, the Department of Labor appears to be taking the position in informal conversations that these rules may apply to service providers to non-plan asset entities as well. A final resolution of this issue must await more formal guidance.

We attach a memorandum that summarizes the proposed rules and suggests a handful of action items to be considered if the rules are adopted as currently written. A copy of the proposed rules and related class exemption are attached.