Investment Management Alert
February 2009
Authors:
David Pickle
202.778.9887
david.pickle@klgates.com
Catherine S. Bardsley
202.778.9289
catherine.bardsley@klgates.com
William A. Schmidt
202.778.9373
william.schmidt@klgates.com
William P. Wade
310.552.5071
william.wade@klgates.com
K&L Gates comprises approximately
1,700 lawyers in 29 offices located in
North America, Europe and Asia, and
represents capital markets participants,
entrepreneurs, growth and middle
market companies, leading FORTUNE
100 and FTSE 100 global corporations
and public sector entities. For more
information, visit www.klgates.com.
www.klgates.com
Rule Requiring Disclosure to ERISA Plans of Indirect
Compensation Takes Effect
Effective January 1, 2009, a DOL regulation now requires employee benefit plans to include in
the annual report required by ERISA detailed information about direct and indirect compensation
received by investment advisers (including investment advisers to mutual funds), banks, brokerdealers and other businesses that provide services to ERISA-covered plans. This new requirement,
which changes Schedule C of Form 5500, an informational form filed annually with the DOL,
is described in more detail in our January 2008 Alert (see “Reporting of Direct and Indirect
Compensation to Service Providers”).1
Until now, employers and other plan administrators (as defined in ERISA) were required to report
only the amount paid directly to service providers. Under the new regulation, effective for reports
relating to plan fiscal years beginning on or after January 1, 2009, plan administrators must (1) ask
service providers to inform them of the amount and type of indirect compensation received by the
service provider and include that information on Schedule C, and (2) report to the DOL the names and
tax identity numbers of all service providers that fail to provide this information. As to some indirect
compen sation (e.g., soft dollar payments that comply with section 28(e) of the Securities Exchange
Act and 12b-1 fees), generic information is sufficient. More specific information is required as to all
other indirect compensation. Although we understand that few plan administrators have yet taken
active steps to ask service providers for the information about indirect compensation required by
new Schedule C, all investment advisers and financial institutions with employee benefit plan clients
should anticipate receiving these requests as plan administrators try to complete and file the new
Schedule C. Financial service providers to employee benefit plans should therefore understand the
information required by Schedule C and the manner in which this information can be provided to
plan clients, including possible incorporation of that information into existing documents.
Please feel free to call any of the persons listed below if you would like additional information about
the new reporting requirements or if you have any questions.
1 The January 2008 Alert also discusses a proposed regulation mandating specific contractual provisions in service agreements
with (or for) plans. This regulation has been withdrawn pursuant to a government-wide directive from the White House on
January 20, 2009. The Schedule C regulation was finalized in late 2007 and is unaffected by that directive.
K&L Gates comprises multiple affiliated partnerships: a limited liability partnership with the full name K&L Gates LLP
qualified in Delaware and maintaining offices throughout the U.S., in Berlin and Frankfurt, Germany, in Beijing (K&L
Gates LLP Beijing Representative Office), and in Shanghai (K&L Gates LLP Shanghai Representative Office); a limited
liability partnership (also named K&L Gates LLP) incorporated in England and maintaining our London and Paris
offices; a Taiwan general partnership (K&L Gates) which practices from our Taipei office; and a Hong Kong general
partnership (K&L Gates, Solicitors) which practices from our Hong Kong office. K&L Gates maintains appropriate
registrations in the jurisdictions in which its offices are located. A list of the partners in each entity is available for
inspection at any K&L Gates office.
This publication is for informational purposes and does not contain or convey legal advice. The information herein
should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
©2009 K&L Gates LLP. All Rights Reserved.