ASPPA Asks DOL for Clarification And Relief On Fee Disclosure Regulation

| April 30, 2012 | 0 Comments

Delay in Guidance Requires Practitioners to Request an Extension to Meet New Compliance Regulations

ARLINGTON, VA, (April 30, 2012) – The following is a statement from Craig P. Hoffman, General Counsel and Director of Regulatory Affairs of The American Society of Pension Professionals & Actuaries (ASPPA), the Council of Independent Recordkeepers (CIkR), and The National Association of Plan Advisers (NAPA) from a comment letter filed with the U.S. Department of Labor’s (DOL) Employee Benefits Security Agency’s (EBSA) regarding issues with the Department’s recently released 408(b)(2) regulation.

“ASPPA and its affiliate organizations, CIkR, and NAPA, continue their support of the DOL’s efforts to improve fee transparency. Full disclosure by service providers of what they charge and how they are paid is critical information plan fiduciaries need in order to fulfill their responsibilities under ERISA. Greater fee transparency allows plan sponsors to make better, more informed decisions, which ultimately is to the benefit of plan participants. There is a need, however, for clarification from the Department on the proper treatment of asset allocation strategies under the new rules and for a transitional period of relief as practitioners and plan sponsors move forward with the implementation process.

Many participants will need help in understanding how to benefit from the information they will be given about each of a plan’s Designated Investment Alternatives (DIAs). The Department has encouraged plan sponsors to offer investment education to their employees. This education is usually provided under the guidelines the Department issued in Interpretative Bulletin 96-1. It often includes examples of asset allocation strategies and investment models that may be appropriate based on an individual’s age, investment time horizon and risk tolerance. These services are critically important in assisting participants in achieving a diversified and well reasoned investment portfolio from among the plan’s DIAs. Concerns have been raised that these services might themselves be considered to be a DIA which if true, would make these services far more difficult to offer. This is because of the extra regulatory disclosures that would be required in addition to the disclosures on the underlying funds. For this reason, we strongly recommend that the DOL issue guidance that clarifies that services such as asset allocation strategies and model portfolios offered in conjunction with investment education as contemplated by Interpretative Bulletin 96-1 are not themselves DIAs and would not engender any disclosure obligation beyond that required for the underlying funds that are the true DIAs.
The effective date of the final 408(b)(2) regulations is only weeks away, but there remain a number of issues that could benefit from clarifying guidance. Unfortunately, our members have had to move forward with their systems work in order to meet the regulatory deadline. In doing so, they have had to make decisions without the benefit of clarifying guidance. Many have already begun the task of furnishing the required disclosures. It would be very disruptive if clarifying guidance is now released that requires immediate changes to work that has already been done.

For this reason, we request that the Department provide for a good faith transition period for compliance in recognition of the uncertainties that remain in regard to the regulations’ application. In past correspondence, ASPPA has emphasized the need for an orderly transition period. Most providers began the necessary work to implement these regulatory initiatives some time ago. In doing so, many have made good faith determinations as to what the regulations require. If clarifying guidance is issued, it should recognize the need for a transition period during which good faith efforts to comply will be acceptable.

We have provided extensive comments to the DOL at every step of the fee disclosure process. As we near the ‘finish line,’ it is crucial that DOL provide clarification on these issues and give providers enough time to make the required system changes to implement the final rules.”

For more detail on ASPPA’s recommendations to the DOL read our comment letter.

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About ASPPA: The American Society of Pension Professionals & Actuaries (ASPPA) is a national organization of more than 8,500 retirement plan and benefits professionals that serves as the educator, voice, and advocate for the employer-based retirement system. ASPPA members are administrators, actuaries, advisors, attorneys, accountants, and other financial services professionals who provide consulting and administrative services for qualified retirement plans.

About CIkR: The Council of Independent 401(k) Recordkeepers (CIkR) is a national organization of 401(k) plan service providers. CIkR members are unique in that they are primarily in the business of providing retirement plan services as compared to financial services companies who primarily are in the business of selling investments. Collectively the members of CIkR provide services for over 68,000 retirement plans covering 2.8 million participants and holding in excess of $120 billion in assets.

About NAPA: The National Association of Plan Advisors (NAPA) is an affiliate organization of the American Society of Pension Professionals & Actuaries (ASPPA). NAPA was created by and for retirement plan advisors with a specific purpose—to provide plan advisors with greatly needed advocacy, business intelligence and superior networking opportunities. Membership is open to all retirement plan advisors and support personnel. NAPA’s mission is to be a leader in the evolution of the national retirement system to improve transparency, effectiveness, and governance in an effort to improve the retirement outcome and security for participants.


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