What Is a 408(b)(2) Disclosure—and Why Should Employers Care? 

If you offer a 401(k) plan, you’re responsible for making sure your employees get a fair deal. That includes reviewing something called a 408(b)(2) disclosure—a document that helps you understand who’s getting paid from your plan and how much. 
It might sound complicated, but it’s actually a powerful tool that can help you protect your team and your business. 

What Does “408(b)(2)” Mean?

 
408(b)(2) refers to a section of ERISA (the Employee Retirement Income Security Act of 1974). Regulations issued under Section 408(b)(2) require service providers to give employers (and other responsible fiduciaries in a retirement plan) all the information necessary for those individuals to do the following: 

• Assess the reasonableness of fees charged (directly and indirectly) 
• Identify any potential conflicts of interest 
• Satisfy fiduciary reporting duties and disclosure requirements  ¹

What’s in a 408(b)(2) Disclosure? 

A good 408(b)(2) disclosure should clearly show: 

• All services being provided 
• Whether each provider is a fiduciary 
• All compensation—both direct (paid from the plan) and indirect (like revenue sharing from investment providers) 

 
For example, if your advisor gets paid by a mutual fund company in your plan, that’s indirect compensation, and it must be disclosed. 

Who Prepares the 408(b)(2)? 

Any covered service provider (CSP) must give you a 408(b)(2) disclosure. This includes: 

• Recordkeepers 
• Investment advisers 
• TPAs 
• Brokers 
• Anyone paid indirectly for services like legal, accounting, or custodial work 

Any CSP working on your plan will be obligated to prepare disclosures and share them with you.² 

How Do I Get a 408(b)(2) Disclosure From My Provider? 

Providers are required to give you one when you initially contract with them and are encouraged by the Department of Labor to provide a guide to help you review it. You can usually find the disclosure in your initial contract.  
 
Any changes to the information provided in your initial 408(b)(2) disclosure, such as changes to fees or the vendors serving your account, must be disclosed to you within 60 days of your provider being notified of the change. Changes to investment-related information must be disclosed at least annually.¹ If you haven’t seen one in a while, ask your provider for an updated copy. 

What Should You Do With It?

As a fiduciary, you’re required to monitor plan fees and services, to ensure participants are receiving an appropriate level or service for a reasonable fee. Here’s how to stay compliant and meet your fiduciary responsibilities: 

• Request disclosures from all service providers 
• Review and compare fees—ask your adviser to benchmark your plan 
• Document your process—keep notes, disclosures, and comparisons in your fiduciary file 

To learn more about 401(k) Plan fees, check out our Retirement Plan Cost Guide. 

Bottom Line 

A 408(b)(2) disclosures helps you make sure your 401(k) plan is fair, transparent, and working in your employees’ best interest. Reviewing them regularly key to ensure your fiduciary duty—and a smart way to protect your business. However, you don’t have to do it on your own. Fisher\SMB can help, contact us to find the fiduciary balance for your business. 

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