The Invoicing Amdendment Secure 3.0 Should Include
The Surgical Amendment post walked through what provisions of 408(b)(2) become redundant once quarterly invoicing replaces projection based disclosure. This post does the affirmative side. Here is the actual statutory text that would add the invoicing requirement to ERISA.
The following statutory text would amend Section 408(b)(2) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1108(b)(2)) by designating the existing text as subparagraph (A) and by adding at the end the following new subparagraph (B).
"(B) QUARTERLY INVOICING REQUIREMENT.
"(i) IN GENERAL. A covered service provider to a covered plan shall furnish to the responsible plan fiduciary, not less frequently than quarterly, an invoice in dollar terms covering all direct and indirect compensation actually received by the service provider and its affiliates and subcontractors during the period to which the invoice applies.
"(ii) CONTENTS. Each invoice shall include:
(I) the total compensation received during the period, expressed in dollars;
(II) identification of each source from which compensation was received, separately stating amounts received from the plan, from participant accounts, and from third parties including fund companies through revenue sharing, sub-transfer agent payments, 12b-1 fees, stable value spread income, commissions, or any other indirect compensation channel;
(III) a description of the services delivered during the period to which the compensation relates; and
(IV) a reconciliation to amounts deducted from plan or participant accounts during the period.
"(iii) REGULATIONS. The Secretary shall prescribe such regulations as are necessary to carry out this subparagraph, including standards for invoice format, content, delivery, and recordkeeping.
"(iv) CONFORMING AMENDMENTS. The Secretary shall, not later than 12 months after the date of enactment of this subparagraph, identify and propose for amendment those provisions of section 2550.408b-2 of title 29, Code of Federal Regulations, that become redundant or sharply simplified in light of the requirements of this subparagraph.
"(v) EFFECTIVE DATE. This subparagraph shall apply with respect to plan years beginning after the date that is 18 months after the date of enactment."
That is the paragraph.
The amendment performs four functions. It requires the invoice. It defines what the invoice must contain. It directs the Secretary to update the implementing regulation and to identify what becomes redundant. It establishes an effective date that gives the industry reasonable lead time.
What the amendment does not do is rewrite ERISA's fiduciary framework. The statutory three part test stays intact. The test asks whether the service is necessary, whether the contract is reasonable, and whether the compensation is no more than reasonable. The covered plan and covered service provider definitions stay. The fiduciary status disclosure stays. The investment level disclosures stay. The amendment changes the compensation disclosure mechanism without disturbing the underlying legal architecture.
This is the SECURE 3.0 provision the bill should include. 408(b)(2) was designed to produce market discipline through disclosure across many provisions. The invoicing amendment produces that discipline in one paragraph by replacing the mechanism. It replaces projections with actuals. It replaces percentages with dollars. It replaces one time disclosure with recurring disclosure. It replaces a narrative document with a reconcilable invoice.
SECURE 2.0 contained more than 90 provisions and did not include this one. The provisions it did include focused on expanding coverage, adjusting contribution and distribution rules, and modifying employer incentives. None addressed the compensation architecture that determines whether plan sponsors can function as buyers of the services they purchase. SECURE 3.0 is in the early crafting stage. The window to include a structural compensation provision is open now and will tighten as the bill moves through markup.
The legislative path is straightforward. The amendment is one paragraph. The conforming amendments to 29 CFR 2550.408b-2 are within the Secretary's existing rulemaking authority. The effective date provides 18 months of lead time. The compliance burden falls in the same direction industry has already been moving, since major recordkeepers already invoice employers for administration fees. The missing element is the requirement that all compensation appear on the same recurring document.
The conceptual case for invoicing is developed in Two Reform Efforts, One Structural Problem. The provision by provision accounting of what invoicing replaces is in The Surgical Amendment. The statutory text above completes the legislative architecture. Together, the three pieces describe a structural reform that fits within an existing legislative vehicle and addresses the compensation problem that disclosure has not resolved.
One paragraph added. Several provisions struck. Better information. Lower compliance burden. A working market for retirement plan services.