What information must plan service providers give to fiduciaries before contract approval?

Plan service providers are required to furnish fiduciaries with a clear and comprehensive statement regarding the services they will provide and the associated compensation before contract approval. This requirement is rooted in the fiduciary duty that plan sponsors have to act in the best interests of the plan participants and beneficiaries. By obtaining this information, fiduciaries can assess whether the services provided align with the plan's needs and determine if the compensation is reasonable in relation to those services.

Providing a detailed statement of services and compensation aids in transparency and promotes informed decision-making, ensuring that fiduciaries understand what they are paying for and what to expect from the service provider. This is essential not only for compliance with legal standards but also for maintaining the trust and integrity of the plan's governance.

While understanding a provider's previous contracts, background and reputation, or projected future earnings may be relevant for a fiduciary's overall assessment, those elements are not explicitly required to be disclosed prior to contract approval in the same manner as the statement regarding services and compensation. Thus, the emphasis is on ensuring fiduciaries have the necessary information to evaluate the terms of service and costs effectively.