What Is a 408(b)(2) Service Provider Disclosure for a 401(k)?

A 408(b)(2) disclosure is the plan-level fee and conflict information a covered service provider must give the 401(k) fiduciary responsible for hiring or renewing that provider. Its purpose is not simply transparency. The disclosure is part of the legal architecture that allows a plan to pay a party in interest for services without turning the service arrangement into a prohibited transaction.^[1][2]

That is why the sponsor-side question is different from the participant question.

Participants ask:

What is this plan costing my account?

The hiring fiduciary has to ask:

Who is being paid, by whom, for what, under what arrangement, and is the total compensation reasonable for the services the plan actually receives?

INV-073 covers participant-level fee disclosures.

This article addresses the fiduciary side.

Section 408(b)(2) Is an Exemption First

ERISA Section 406 broadly restricts transactions between a plan and parties in interest.^[8][9]

That creates an obvious operational problem.

A 401(k) routinely needs to pay:

• recordkeeper
• trustee or custodian
• TPA
• investment adviser
• broker
• auditor
• attorney
• consultant.

Many of those providers can be parties in interest once they provide services to the plan.

Section 408(b)(2) supplies a statutory exemption for qualifying service arrangements.^[1][8]

Three Conditions Sit Under the Exemption

The exemption rests on three conditions:^[1]

1. services necessary for establishment or operation of the plan
2. a reasonable contract or arrangement
3. compensation that remains reasonable for the services actually received.

For covered pension-plan arrangements, required fee and conflict disclosures are part of the:

reasonable contract or arrangement

condition.^[1]

The paperwork therefore connects directly to prohibited-transaction status.

The Disclosure Rule Does Not Replace Fiduciary Duty

DOL makes clear that these disclosure requirements are:

independent of ERISA Section 404 fiduciary obligations.^[1]

A fiduciary can receive every required disclosure and still make a bad decision.

Examples:

• pay obviously excessive fees
• ignore serious conflicts
• fail to compare alternatives
• retain a provider whose service deteriorated
• allow plan assets to subsidize unnecessary services.

Disclosure supplies information.

It does not make the decision prudent.

A Reasonable Contract Can Still Involve Unreasonable Compensation

Suppose the provider gives a technically complete package:

• services
• fee formula
• revenue-sharing disclosures
• termination terms.

The fiduciary then learns comparable providers offer materially similar service for half the price.

A disclosure-compliant arrangement can still fail the:

no more than reasonable compensation

condition.

Do not confuse disclosure compliance with fee reasonableness.

Which Plans Are Covered?

The pension-plan disclosure rule applies to covered employee pension benefit plans under ERISA, subject to specified exclusions.^[1]

A conventional private-sector 401(k) generally sits squarely inside the rule.

The covered-plan definition excludes categories such as:

• SEP arrangements
• SIMPLE retirement accounts
• IRAs
• individual retirement annuities
• specified older 403(b) annuity contracts or custodial accounts meeting the regulation's detailed conditions.^[1]

For ordinary employer 401(k) work, the more important question is usually:

Is the provider covered?

The $1,000 Threshold Is Only the First Provider Test

A provider generally enters the definition when it:^[1][2]

• contracts or arranges directly with the covered plan
• reasonably expects $1,000 or more
• in direct or third-party compensation
• connected with covered services.

The threshold is based on expected compensation.

Not only billed compensation.

Not only cash paid directly by the plan.

Direct and Indirect Compensation Count Together

Assume a TPA expects:

• $800 paid directly by employer/plan arrangement
• $600 of qualifying third-party compensation from another source.

Expected covered compensation:

$1,400

The provider can cross the regulatory threshold even though neither component alone equals $1,000.

That is why a sponsor should not test coverage from the invoice alone.

There Are Three Principal Provider Categories

The rule does not say:

every vendor receiving $1,000 must produce a 408(b)(2) package.

The provider must also fall into a covered service category.^[1]

Category 1: Fiduciary or registered investment-adviser services

This includes specified services:

• directly to the plan as an ERISA fiduciary
• as a fiduciary to a plan-asset investment vehicle in which the plan has a direct equity investment
• directly to the plan as a federally or state-registered investment adviser.^[1]

Category 2: Recordkeeping or brokerage platforms

A recordkeeper or broker is covered when services are provided to a participant-directed individual account plan and one or more:

designated investment alternatives

are made available through the platform or similar mechanism.^[1]

A typical participant-directed 401(k) recordkeeper often falls here.

Category 3: Specified services receiving third-party compensation

The regulation lists professional and administrative services such as:^[1]

• accounting
• auditing
• actuarial
• appraisal
• banking
• specified consulting
• custodial
• insurance
• investment advisory
• legal
• recordkeeping
• securities or investment brokerage
• third-party administration
• valuation

when the provider, an affiliate or subcontractor reasonably expects qualifying third-party compensation.

The category matters because indirect payments can be where conflicts are least visible.

A Vendor Name Does Not Decide Coverage

"Consultant" is not enough.

"TPA" is not enough.

"Broker" is not enough.

Ask:

• what services does the provider actually perform?
• how is it compensated?
• does it contract directly with the plan?
• does the arrangement meet one of the covered categories?

Commercial labels can be imprecise.

The regulation is functional.

Affiliates and Subcontractors Need Careful Treatment

The rule generally does not make an affiliate or subcontractor a separate covered service provider solely because it performs covered services under another provider's plan contract.^[1]

That does not make its compensation invisible.

The primary covered provider can still have disclosure obligations involving compensation received by:

• affiliates
• subcontractors.

The sponsor needs the economic chain even when only one entity signs the plan contract.

Who Is the Responsible Plan Fiduciary?

DOL defines the:

responsible plan fiduciary

as the fiduciary with authority to cause the plan to:^[1]

• enter into
• extend
• renew

the service contract or arrangement.

That person or committee is the key disclosure recipient.

The role is about authority over the arrangement.

Not necessarily who opens the email attachment.

The Disclosure Can Be Spread Across Several Documents

Required information must be furnished:

in writing.^[1][2]

It does not require one standardized DOL form.

A provider can use:

• service agreement
• fee schedule
• investment appendix
• revenue-sharing schedule
• compensation guide
• separate electronic document.

DOL's sample guide is exactly that:

a sample guide

not a mandated form.^[6]

The fiduciary still has to be able to find and understand the required information.

A Complete Package Should Explain the Services

The provider must describe the services to be furnished under the arrangement.^[1]

That sounds obvious.

It becomes important in bundled arrangements.

An invoice labeled:

"plan administration"

may hide several distinct functions:

• participant recordkeeping
• payroll interfaces
• compliance testing
• Form 5500 preparation
• investment platform
• call center
• participant education
• managed accounts.

Fee reasonableness cannot be evaluated well until the service scope is clear.

Fiduciary Status Must Be Disclosed When Applicable

If the provider, an affiliate or subcontractor will provide specified fiduciary services, the disclosure must state that status.^[1]

The same is true when applicable for a registered investment adviser.

That helps the sponsor understand whether the provider is taking:

• fiduciary responsibility
• registered-adviser responsibility
• only ministerial or nonfiduciary responsibility.

Do not assume a provider is a fiduciary merely because its marketing says:

"fiduciary support."

Read the actual status disclosure and contract.

Direct Compensation Is the Visible Layer

Direct compensation generally means compensation received directly from the covered plan.^[1]

Examples can include:

• fixed recordkeeping fee charged to plan assets
• per-participant administration charge
• asset-based advisory fee deducted from trust
• plan-paid audit fee
• transaction charges borne by the plan.

This is usually the easiest layer to see.

It can still be incomplete.

Indirect Compensation Is Where the Analysis Gets Harder

Outside-source compensation generally comes from a source other than:^[1]

• covered plan
• plan sponsor
• covered service provider
• affiliate

subject to the rule's treatment of subcontractor payments.

Examples can include:

• revenue sharing
• finder or placement compensation
• insurance-related payments
• payments from investment providers
• certain external compensation tied to plan business.

The economic issue is not that external compensation is automatically improper.

It is that the fiduciary cannot evaluate total compensation or conflict incentives if the payment is hidden.

Indirect Compensation Requires More Than a Number

The provider must describe:^[1][2][3]

• the outside payment
• services for which it will be received
• the payer
• the arrangement under which the payer compensates the provider, affiliate or subcontractor.

That last item matters.

"Provider receives 0.20%" tells the fiduciary less than:

who pays 0.20%, what activity causes the payment and why the payer is paying it.

Conflict analysis depends on the relationship.

Example: Recordkeeper Receives Revenue Sharing

Assume recordkeeper charges the plan:

$0 explicit recordkeeping fee.

Its platform includes funds that pay:

0.20% of assets

to the recordkeeper or affiliate.

A zero-dollar invoice does not mean the recordkeeper earns nothing.

The disclosure should make those outside-payment economics visible.

Then the fiduciary can ask:

• how much does the arrangement generate at current assets?
• does the amount rise automatically as plan assets rise?
• are participants in higher-revenue funds subsidizing administration?
• is excess revenue rebated?
• could a lower-revenue share class reduce participant cost?

That is a fiduciary analysis.

Not merely a disclosure exercise.

"Free Recordkeeping" Requires a Cost Estimate

Bundled recordkeeping receives special treatment.

If recordkeeping is expected to be provided:

• without explicit compensation
• or with compensation offset/rebated based on other compensation

the covered provider must furnish a:

reasonable and good-faith estimate of the cost to the plan of recordkeeping.^[1][2]

The disclosure also has to explain:

• methodology
• assumptions
• detailed recordkeeping services.

Calling it:

free

is not enough.

The Estimate Should Be Economically Grounded

The estimate should consider, as applicable:^[1]

• rates the provider or related party would charge or receive from third parties
• prevailing market rates
• similar services
• similar plans
• similar participant populations.

That gives the fiduciary a usable number.

It also exposes whether an apparently free bundle is being financed elsewhere.

Compensation Can Be Described Several Ways

The rule does not force every fee into a single dollar estimate.

Compensation or cost can be described as:^[1]

• monetary amount
• formula
• percentage of plan assets
• per-participant charge
• another reasonable method when the first methods do not work.

A reasonable good-faith estimate can be used when compensation cannot otherwise readily be described, if:

• methodology
• assumptions

are explained.^[1]

The description must still be sufficient to let the fiduciary evaluate reasonableness.

Noncash Compensation Has a De Minimis Rule

For disclosure purposes, compensation includes monetary-value items such as:^[1]

• money
• gifts
• awards
• trips.

But nonmonetary compensation valued at:

$250 or less in the aggregate during the term of the arrangement

is excluded from this disclosure framework's compensation definition.^[1]

That is not a general ERISA safe harbor for gifts.

It is a definition inside this disclosure rule.

Other conflict and fiduciary standards still apply.

Termination Compensation Must Be Visible

The provider must disclose compensation expected in connection with termination and explain how prepaid amounts will be calculated and refunded.^[1]

This can expose:

• surrender charges
• termination fees
• recouped implementation costs
• prepaid service adjustments.

A low annual fee can be less attractive if exiting the arrangement is expensive.

The Contract Also Needs a Reasonable Exit

Separately, the service-arrangement rule says a service contract is not reasonable if it locks the plan into a disadvantageous arrangement without the ability to terminate on:

reasonably short notice

without a penalty to the plan.^[1]

That does not forbid every termination charge.

A reasonable amount that compensates the provider for actual loss—such as legitimate unrecouped start-up costs—can be different from a penalty.

The distinction is economic substance.

Manner of Payment Must Be Explained

The provider must also explain how compensation will be received.^[1]

Examples:

• invoice to plan
• deduction from trust assets
• deduction from investments
• asset-based charge
• indirect third-party payment.

This matters because cost allocation can change which participants actually bear the fee.

A $100,000 annual provider cost paid by the employer is economically different to participants from the same amount deducted from accounts.

Related-Party Compensation Can Require Disclosure

Specified related-party allocations also fall within the disclosure framework:

• covered provider
• affiliates
• subcontractors

when the regulatory conditions are met, including transaction-based compensation or compensation charged against plan investments.^[1][2]

A sponsor should not accept:

"the provider receives no fee"

without asking whether affiliates do.

Bundled financial firms frequently divide functions across related entities.

Investment Information Can Be Part of the 408(b)(2) Package

Specified fiduciary providers, recordkeepers and brokers can have additional investment-disclosure duties.^[1]

Information can include:

• charges directly against an investment
• annual operating expenses
• additional ongoing expenses
• designated-investment-alternative data needed for participant disclosure.

This creates a link between:

provider-to-plan disclosure

and:

plan-to-participant disclosure.

INV-073 covers the participant-facing side.

Recordkeepers Can Pass Through Issuer Materials

For designated investment alternatives, the regulation allows specified recordkeepers or brokers to rely on current materials from certain unaffiliated issuers when conditions are satisfied.^[1]

The provider must act:

• in good faith
• without knowledge that the materials are incomplete or inaccurate

and provide the required statement about the materials.^[1]

That is a practical pass-through rule.

It does not excuse known bad information.

Initial Disclosure Comes Before the Decision

Required initial information generally must be furnished:

reasonably in advance

of entering into, extending or renewing the arrangement.^[1][7]

The phrase does not specify:

30 days 60 days 90 days

for ordinary initial disclosures.

The purpose controls.

The fiduciary should have enough time to:

• read the material
• ask questions
• compare cost
• identify conflicts
• make a decision.

A disclosure delivered after the renewal auto-executes defeats much of the point.

Renewal Is a Fresh Decision Point

The timing rule applies not only when the provider is first hired.

It also applies to:

• extensions
• renewals.^[1]

A long-standing provider therefore should not become:

"set it and forget it."

Fee reasonableness and service quality can change.

Many Changes Have a 60-Day Outside Deadline

For changes to specified information involving:^[1]

• services
• fiduciary/RIA status
• compensation
• recordkeeping
• manner of receipt

the provider generally must disclose the change:

as soon as practicable

and no later than:

60 days after being informed of the change

unless extraordinary circumstances outside the provider's control prevent timely disclosure.^[1]

The phrase:

as soon as practicable

comes first.

Sixty days is not a target delay.

Investment-Related Changes Use a Different Schedule

Changes to specified investment-related information under the rule are generally disclosed:

at least annually.^[1][3]

That is why saying:

"all 408(b)(2) changes are due within 60 days"

is wrong.

The information category determines timing.

Reporting Support Has Its Own Timing Rule

The responsible fiduciary or plan administrator can request other compensation information needed for Title I:

• reporting
• disclosure

requirements.^[1]

The provider must generally furnish that information reasonably in advance of the date the plan says it needs to comply.

This can matter for:

• Form 5500
• participant fee reporting
• related ERISA disclosures.

A provider cannot satisfy the contract disclosure and then ignore later reporting needs tied to its compensation.

Good-Faith Errors Have a 30-Day Correction Rule

A disclosure error or omission does not automatically make the arrangement unreasonable when the provider:^[1]

• acted in good faith
• used reasonable diligence
• corrects the information as soon as practicable
• and no later than 30 days after learning of the error or omission.

That is a correction rule.

Not permission to issue careless disclosure packages.

Example: Provider Finds a Fee-Formula Error

Provider disclosed:

0.15%

administrative fee.

It later discovers the actual formula is:

0.18%.

The provider learns of the error on:

June 1.

If the good-faith error rule otherwise applies, correction should occur:

• as soon as practicable
• no later than July 1.

The fiduciary then needs to re-evaluate reasonableness if the corrected economics are material.

Missing Information Can Break the Exemption

DOL's current failure-notice page states the consequence plainly:

if a covered service provider fails to provide required information, the service contract or arrangement is not reasonable under the rule and can become prohibited under ERISA.^[4]

The hiring fiduciary can be implicated because causing the plan to receive services from and pay a party in interest is itself within Section 406(a).

That is why the rule contains relief for an innocent fiduciary.

Relief Is Conditional

The responsible fiduciary is not automatically excused merely because the provider caused the disclosure problem.

The class exemption conditions have to be met.^[1][4][5]

The starting conditions are:

• fiduciary did not know the provider had failed or would fail
• fiduciary reasonably believed required information had been disclosed.^[1]

Once the fiduciary discovers the problem, the procedural clock starts.

Step 1: Request the Missing Information in Writing

Upon discovering the disclosure failure, the responsible fiduciary must request that the covered provider furnish the missing information:

in writing.^[1][5]

A phone call can be useful operationally.

It is not the cleanest compliance record for this rule.

The written request should identify exactly what is missing.

Example: Missing Indirect-Compensation Payer

Provider says:

"Indirect compensation may be received."

But it does not identify:

• payer
• services tied to the payment
• arrangement producing the payment.

The fiduciary should request those specific items.

A vague request such as:

"please send a complete 408(b)(2)"

creates unnecessary ambiguity later.

Step 2: Track Refusal and the 90-Day Mark

If the provider does not comply within:

90 days

of the written request, DOL notification becomes required for the fiduciary relief procedure.^[1][5]

But the filing deadline can occur earlier.

Why?

Because an explicit provider refusal is a separate trigger.

Step 3: DOL Notice Is Due 30 Days After the Earlier Trigger

The notice must be filed no later than:

30 days after the earlier of:^[1][5]

1. provider's refusal to furnish the requested information
2. 90 days after the written request.

This is the timing rule to calendar.

Not:

"wait 90 days, then always add 30 more."

Example: Provider Refuses on Day 20

Written request:

January 1

Provider explicitly refuses:

January 21

The earlier trigger is:

January 21

The DOL notice deadline is generally:

30 days after that refusal

under the rule.^[1][5]

Waiting until 120 days after January 1 would miss the class-exemption timing.

Example: Provider Stays Silent

Written request:

January 1

No response.

Ninety-day point:

April 1 in a simplified example where day-count mechanics produce that date.

The notice is due no later than:

30 days after the 90-day trigger.^[1][5]

The actual calendar should be computed precisely.

Do not rely on memory.

What Goes in the DOL Notice?

The rule requires information including:^[1][5]

• plan name
• plan number
• sponsor name/address/EIN
• responsible fiduciary contact information
• provider name/address/phone and EIN if known
• services provided
• missing information
• date of written request
• whether provider still serves the plan.

DOL offers an electronic:

Fee Disclosure Failure Notice

tool.^[4]

Paper submission remains described in the regulation and DOL materials.^[1][4][5]

The Electronic Tool Gives Confirmation, Not an Individual Ruling

DOL says the web tool provides immediate confirmation that the notice was received.^[4]

That is useful evidence.

The Department also states that it will not generally issue individual determinations saying whether every condition for the class exemption was met.^[4]

The fiduciary's own file therefore has to prove the sequence.

Step 4: Decide Whether the Provider Can Stay

If the provider fails to respond within 90 days, the responsible fiduciary must determine whether to:

• continue
• terminate

the arrangement consistent with ERISA prudence.^[1][5]

That is not a mechanical:

always fire the provider on day 91

rule for every historical information gap.

The nature of the missing information matters.

Future-Service Information Gets Stricter Treatment

If the missing information relates to:

future services

and is not disclosed promptly after the 90-day period, the fiduciary must terminate the arrangement:

as expeditiously as possible

consistent with prudence.^[1][5]

That is a much stronger directive.

A fiduciary cannot indefinitely renew a provider whose future compensation or service economics remain undisclosed.

Prudence Can Affect the Exit Timing

"Terminate as expeditiously as possible" does not mean:

recklessly shut down plan operations tomorrow.

Replacing a recordkeeper can involve:

• data conversion
• participant blackout period
• payroll transition
• investment mapping
• cybersecurity review
• contract termination.

The fiduciary should move promptly while avoiding a transition that itself harms participants.

Document why the timing is prudent.

Section 408(b)(2) Does Not Excuse Self-Dealing

The exemption expressly does not cover fiduciary acts described in ERISA Section 406(b), including:^[1]

• dealing with plan assets in the fiduciary's own interest
• acting on behalf of an adverse party in a plan transaction
• receiving personal consideration from a party dealing with the plan in connection with plan assets.

This is critical.

A provider arrangement can satisfy Section 408(b)(2) and still contain a separate fiduciary self-dealing violation.

Example: Reasonable Adviser Fee Plus Kickback

Plan pays adviser:

0.20%

for necessary services.

The arrangement is fully disclosed.

Fee is reasonable.

Then the fiduciary who selected the adviser secretly receives:

$25,000

from the adviser personally.

The service arrangement's 408(b)(2) exemption does not sanitize the personal payment.

Section 406(b) is a separate problem.

Disclosure alone cannot cure divided loyalty.

408(b)(2) vs. 404a-5

They are connected.

They are not interchangeable.

Direct vs. Indirect Compensation

The invisible fee can matter more than the visible fee.

Covered-Provider Examples

The $1,000 number is not a universal vendor-disclosure threshold.

A Sponsor-Side Fee Review Should Rebuild Total Compensation

For every major provider, build:

Direct plan compensation + employer-paid compensation relevant to the arrangement + qualifying those outside payments + affiliate/subcontractor allocations + investment-related compensation + termination economics = practical total provider economics

Then ask:

• what services correspond to that compensation?
• which participants bear it?
• does compensation rise with plan assets?
• does a provider profit more when certain investments are used?
• are rebates or offsets returned?
• what conflicts follow from the payment arrangement?

This converts disclosure into fiduciary analysis.

Example: Asset Growth Makes an Old Fee Expensive

Recordkeeper fee:

0.20% of plan assets

Plan assets at hire:

$10 million

Annual fee:

$20,000

Five years later:

$80 million

Same percentage:

$160,000

Service scope changed only modestly.

The disclosure can be perfectly accurate.

The fiduciary still has to ask whether $160,000 remains reasonable.

A percentage formula should not become permanent simply because it was reasonable at a smaller asset base.

Example: Per-Capita Pricing Can Move the Other Direction

Recordkeeper charges:

$70 per participant

Plan grows from:

• 300 participants
• to 3,000.

Annual fee rises from:

$21,000

to:

$210,000.

Scale may reduce provider unit cost.

A reasonable fiduciary review can ask whether volume pricing should improve.

The disclosure tells the plan how the fee works.

Benchmarking tells the fiduciary whether it still makes sense.

Example: Provider Changes Formula Midyear

Original fee:

$50 per participant

Provider changes to:

$65 per participant

Provider is informed of the change on:

May 1.

For information subject to the general change rule, disclosure should occur:

• as soon as practicable
• no later than 60 days after the provider is informed

absent extraordinary circumstances.^[1]

The fiduciary then decides whether to accept the new economics.

Example: Indirect Compensation Appears During Renewal

Adviser historically received only a direct fee.

Renewal package now says an affiliate will receive payments from certain investment issuers.

The fiduciary should not treat the new information as:

"just another disclosure line."

Ask:

• which investments generate payment?
• how much?
• does the compensation affect recommendations?
• is there a lower-conflict alternative?
• is the provider still acting in the represented fiduciary capacity?

New compensation can change the conflict map even when total dollars barely change.

The Best 408(b)(2) File Is a Decision File

Keep:

Provider disclosure

Every document making up the current package.

Contract

Including renewal and termination provisions.

Fee map

Direct, indirect, investment and termination compensation.

Conflict map

Payers, affiliates, subcontractors and incentives.

Benchmark

Comparable provider pricing and service scope.

Fiduciary decision

Why arrangement was selected or renewed.

Monitoring

Changes, service issues and fee evolution.

Correction file

Written request, provider response/refusal, DOL notice and termination analysis if information was missing.

The provider's disclosure is evidence.

The fiduciary file is the decision.

A Disclosure Review Should Not Be Delegated Blindly

A consultant can summarize the package.

A TPA can organize it.

Counsel can interpret the rule.

The responsible fiduciary still owns the decision to:

• enter
• extend
• renew

the arrangement.

That is why the regulation names the decision-maker.

Red Flags Worth Escalating

"Recordkeeping is free"

Ask for the required cost estimate and other compensation supporting the service.

"Revenue sharing may apply"

Ask:

• who pays
• amount/formula
• services
• payment arrangement.

Fee is expressed as a percentage but no dollar scale is shown

Calculate it at current plan assets.

Provider says it is not a fiduciary but exercises discretion

Analyze function, not label.

Disclosure package arrives after renewal

Ask whether the fiduciary had required information reasonably in advance.

Provider cannot explain affiliate payments

Do not treat affiliate complexity as an excuse for opacity.

Termination fee appears punitive

Compare with the regulation's reasonable-short-notice standard and actual loss.

Provider refuses missing information

Start the class-exemption calendar immediately.

Frequently Asked Questions

What is a 408(b)(2) disclosure?

It is written service, compensation and conflict information a covered provider must furnish to the responsible fiduciary of a covered pension plan so the service arrangement can satisfy the regulation's reasonableness requirements.^[1][2]

Is it the same as the fee disclosure participants receive?

No.

Participant-directed plan disclosures under 404a-5 are covered in INV-073.

Who receives the provider disclosure?

The responsible plan fiduciary—the fiduciary with authority to cause the plan to enter into, extend or renew the arrangement.^[1]

Does every provider have to give one?

No.

The covered-service-provider definition depends on expected compensation and the provider's service category.^[1]

What is the compensation threshold?

Generally at least $1,000 of expected direct or those outside payments connected with the covered service arrangement.^[1][2]

Can direct and those outside payments be combined for the threshold?

Yes. The rule looks to expected direct or those outside payments received in connection with the covered services.^[1]

What counts as direct compensation?

Generally compensation received directly from the covered plan.^[1]

What counts as indirect compensation?

Generally compensation received from a source other than the plan, sponsor, covered provider or affiliate, subject to the rule's subcontractor treatment.^[1]

Does revenue sharing have to be disclosed?

Qualifying outside-source compensation must be disclosed with the required payer, services and arrangement information.^[1][2]

Can a provider call recordkeeping free?

If recordkeeping is provided without explicit compensation or is offset/rebated by other compensation, the rule requires a reasonable good-faith cost estimate with methodology and service detail.^[1][2]

Is there a required DOL disclosure form?

No.

The information must be in writing, but DOL's guide is a sample rather than a mandatory form.^[1][6]

When must the initial disclosure be provided?

Generally reasonably in advance of entering into, extending or renewing the arrangement.^[1][7]

Are all changes due within 60 days?

No.

Specified service/status/compensation/payment changes generally use the as-soon-as-practicable/60-day rule; specified investment changes are generally disclosed at least annually.^[1]

What if the provider makes an honest error?

The good-faith error rule can preserve reasonableness if the provider corrects the information as soon as practicable and no later than 30 days after learning of the error.^[1]

What if required information is missing?

The responsible fiduciary should request it in writing and follow the class-exemption procedure if the provider does not cure the failure.^[1][4][5]

How long does the provider have after the written request?

The class-exemption procedure uses a 90-day period for the class-exemption procedure.^[1][5]

When is the DOL notice due?

No later than 30 days after the earlier of:

• provider's refusal
• 90 days after the written request.^[1][5]

Is the DOL notice itself enough?

No.

The responsible fiduciary must satisfy all conditions of the exemption, including the knowledge/reasonable-belief rules and the later prudence/termination analysis.^[4][5]

Does DOL tell the fiduciary whether the exemption definitely applies?

DOL says it will not generally issue individual determinations on whether all class-exemption conditions were satisfied.^[4]

Must the provider always be terminated?

Not immediately in every circumstance. After the 90-day failure, the fiduciary must make a prudence-based decision. If missing information relates to future services and remains undisclosed promptly after that period, termination must occur as expeditiously as possible consistent with prudence.^[1][5]

Does Section 408(b)(2) exempt fiduciary kickbacks or self-dealing?

No.

The regulation expressly does not exempt the separate conduct covered by ERISA Section 406(b).^[1]

The ROIStreet 408(b)(2) Review Sequence

Identify the responsible fiduciary → inventory every material service provider → test the $1,000 expected direct/outside-source compensation threshold → classify each provider under the covered service categories → collect the complete written disclosure package → map services and fiduciary/RIA status → map direct compensation → map outside-source compensation, payer, related service and payment arrangement → identify affiliate/subcontractor allocations → isolate bundled recordkeeping economics and any required cost estimate → identify investment-level charges and designated-investment-alternative information → calculate fees in dollars at current plan assets and participant count → compare compensation with service scope and market alternatives → review conflicts, not only price → confirm termination economics and reasonably short exit rights → document the enter/renew/extend decision → track 60-day and annual change disclosures by category → correct good-faith errors within the applicable 30-day rule → if information is missing, issue a precise written request immediately → calendar provider refusal and the 90-day mark → file DOL notice within 30 days of the earlier trigger when required → decide whether continuation remains prudent → terminate future-service arrangements expeditiously when the regulation requires it

The disclosure is not the fiduciary work product.

Its real value is that it turns an opaque vendor relationship into an economic map the fiduciary can challenge: who gets paid, who funds the payment, what service produces it, what conflict follows from it and whether the plan is still receiving enough value to justify the cost.

Sources & References

1. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2550.408b-2 — General Statutory Exemption for Services or Office Space — https://www.law.cornell.edu/cfr/text/29/2550.408b-2
2. U.S. Department of Labor — Employee Benefits Security Administration: Final Regulation Relating to Service Provider Disclosures Under Section 408(b)(2) — https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/fact-sheets/fact-sheet-service-provider-disclosure-regulation.pdf
3. U.S. Department of Labor — Employee Benefits Security Administration: Changes to Final Fee Disclosure Rule — https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/retirement/changes-to-final-fee-disclosure-rule
4. U.S. Department of Labor — Employee Benefits Security Administration: Fee Disclosure Failure Notice — https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/fiduciary-responsibilities/fee-disclosure-failure-notice
5. U.S. Department of Labor — Employee Benefits Security Administration: Summary of the Class Exemption Conditions — https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/fiduciary-responsibilities/summary-of-class-exemption-conditions
6. U.S. Department of Labor — Employee Benefits Security Administration: Guide to Services and Compensation — Sample 408(b)(2) Guide — https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/retirement/sample-guide-for-service-provider-disclosures-under-408b2
7. U.S. Department of Labor — Employee Benefits Security Administration: Reporting and Disclosure Guide for Employee Benefit Plans — https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans
8. Legal Information Institute / U.S. Code: ERISA Section 408 — Exemptions from Prohibited Transactions — https://www.law.cornell.edu/uscode/text/29/1108
9. Legal Information Institute / U.S. Code: ERISA Section 406 — Prohibited Transactions — https://www.law.cornell.edu/uscode/text/29/1106

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan service-provider arrangements, fiduciary duties, compensation and prohibited transactions. This article is not legal, tax, fiduciary, procurement, investment or plan-administration advice. Section 408(b)(2) coverage, disclosure sufficiency, compensation reasonableness, prohibited-transaction status and fiduciary relief depend on the exact services, compensation chain, contract, provider relationships, timing, plan structure and current DOL guidance.

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