408(b)(2) disclosures

[Belgarath]

This seems like a really dumb question, but here goes. Let's say you have a fairly "typical" TPA, and a client has a 401(k) plan on a recordkeeping platform with, (pick anyone - let's say Hancock.) Plan administration fees are billed to the EMPLOYER,not to the plan. Any revenue sharing payments to the TPA are used to directly offset fees otherwise paid by the employer. These fees can also be paid out of plan assets, as provided for in the plan document language, but are usually paid by the employer.

Her's the question on the fee disclosure. Let's say that due to this arrangement, the TPA determines it is a "category 2" CSP, as this recordkeeping platform is offered "in connection with" the service contract. When it comes to the actual detailed disclosure with regard to each "designated investment alternative/investment vehicle" - what actually has to be disclosed by the TPA? Seems like two choices, depending upon how you interpret the regs:

1. TPA would disclose only the revenue sharing, and would not be responsible for all of the other stuff typically found in a prospectus - loads, transactional fees, sales fees, redemption fees, whatever.

2. TPA would be required to disclose all of this "prospectus" garbage, even though the TPA cannot possibly receive any of these amounts.

Option 1 certainly seems more logical. But, if option 2 is required, then it could be covered by providing the same information required for option 1, plus providing a prospectus.

Personally, I'd vote for #1. It seems like the other charges as outlined in the prospectus should be disclosed by the investment provider (Hancock, in this case.)

[Below Ground]

Option One is my understanding.

[Belgarath]

Of course, this brings up the real question: is the TPA really a cetegory 2? In other words,there is nothing whatsoever contractually obligating the plan sponsor to choose a given investment platform - the TPA merely works with the platform, and has a "relationship" with the various platform providers due to having many clients with each one. But the clinet/investment advisor determines what platform will be used.

Does this throw the TPA into the category of offering a recordkeeping platform "in connection with" the contract/arrangement with the plan sponsor - and therefore a cetegory 2 CSP? It seems to me that by any reasonable standard, it does not, (or should not) yet both the actual regs and the preamble are less than clear on the issue. Has anyone had discussion with DOL people about this question?