Service provider and participant fee disclosures

[Belgarath]

Hi all - I'm back after a long break. And no, I wasn't hiding because of the Red Sox dismal September choke job, although I should be...

I know these disclosures are everyone's favorite subject. Just one question - wanted to see what folks think.

What I get out of the regs is that for the 408(b)(2) service provider disclosures, "one-participant" plans ARE subject to these rules. But for the participant fee disclosure regs under 2550-404a, the "one participant" plans are NOT subject to the rules.

Agree/disagree?

[jpod]

Agreed. The regulations under 408b2 apply to the comparable statutory exemption under Section 4975 of the IRC, to which "one participant" plans are subject. However, one participant plans are not subject to Section 404 of ERISA.

I feel your pain. (Phillies phan.)

[jpod]

I take that back. 408b2 regs don't appear to apply to one-participant plans. They apply only to employee benefit plans as defined in Section 3 of ERISA, and there is an existing regulation that says, in effect, that a one-participant plan is not such a plan. One should look through the preamble to the final reg to confirm this; right now I don't have the time or the energy.

[Belgarath]

jpod - I agreed with your first answer! As I read the regulation, it applies to "employee pension benefit plans" or "pension plans" under ERISA 3(2), unless exempt specifically by reason of ERISA 4(b). I think the regulation you are referring to is 2510.3-3, which clarifies the definition ie ERISA 3(3), not in 3(2). So I think you get back to my original premise.

Vat you tink?

[jpod]

I tink a 3(2) plan is also a 3(3) plan, so I think my second answer is correct.

[Belgarath]

Hi jpod - I'd like to explore this a little further, if you don't mind. I'd love to use your interpretation, and maybe that's what the DOL meant but I'm having some difficulty getting there based upon a very literal reading of the regulations. Maybe you can point out where I'm going wrong.

2550.408b-2©(1)(ii) defines a covered plan. And this is an ..."employee pension benefit plan" or a "pension plan" within the meaning of section 3(2)(A) of the act...

So, this takes me to ERISA 3(2)(A), which doesn't really clarify anything here, so I go to 2510.3-2, which specifically defines limitationsd of those defined terms in ERISA 3(2)(A). Nothing there helps to exclude these "one person" plans from the 408b-2 regulations. Agree so far - yes/no?

So now I go to the 2510.3-3, which limits the term "employee benefit plan." And if I understand you correctly, you are saying that since ERISA 3(3) defines an "employee benefit plan" as including an "employee pension benefit plan," and since 2510.3-3(b) clearly states that the term "employee benefit plan" does not include the one person plans we are talking about, that this overrides the specific regulatory reference to ERISA 3(2) - and which does not reference any exception under ERISA 3(3). Have I got that right?

I guess where I'm getting stuck is the specific reference to ERISA 3(2)(A) and the absence of any other reference.

Anyone else want to chime in? This subject has probably been beaten to death elsewhere, but I don't recall really seeing much on it. I suppose I should check to see what Sal says - not that he's automatically right either, but he's right a lot more than I am...

Thanks for any input.

[Belgarath]

Quick update - I just took a look at the EOB - page 14.60 - appears that Sal's interpretation agrees with mine. Not that it means we're right...

Thanks.

[jpod]

I am afraid I am not following the logic here. If a plan is not a 3(3) plan (because it is a one-paticipant plan under the regulation), it can't be either a 3(2) plan or 3(3) plan. I may be missing something, but what is it that I'm missing? What's Sal's technical explanation?

[Belgarath]

He starts with the emphasis that it applies to plans unless they are exempt by reason of ERISA 4(b). To then paraphrase, regarding anything not exempted under 4(b) - that is, governmental, non-electing church plans, and excess benefit plans - he goes back to your original statement, and says to note that qualified plans under IRC 401(a) are subject to these fee disclosures even if they are not covered by Title I of ERISA. Then he states, "In other words, plans (other than IRA funded plans) that are subject to the prohibited transaction provisions under IRC 4975 are subject to the fee disclosure rules."

I also submitted a question to TAG yesterday - I'll let you know what they say.

[Belgarath]

From TAG:

"I agree with your analysis that "one participant" plans are covered. The regulation states that a covered plan is an ‘‘employee pension benefit plan’’ or a ‘‘pension plan’’. . . "within the meaning of section 3(2)(A) (and not described in section 4(b)) of the Act". Since the reference is only to ERISA 3(a)(A) (and not ERISA 3(3)) and 4(b) (which excludes governmental plans, church plans, etc.), it appears that one participant plans are not intended to be excluded from the disclosure rule."