Otherwise, the letter contends, plan fiduciaries could find themselves overwhelmed by interpreting data in multiple documents “The disclosures mandated by the Regulation will be most effective if they are communicated to plan fiduciaries in a clear and consistent manner,” the lawmakers wrote. “In its current form, the Regulation permits disclosures to be made in multiple documents, so plan fiduciaries likely will find themselves overwhelmed by reams of paper and unable to find all of the fees required to be identified by the Regulation. It should be a primary objective of the Regulation to ensure that the disclosures made by covered service providers include a description of all fees and compensation in one place and in a manner that is understandable to average plan fiduciaries.”
Next, the lawmakers argued that EBSA should retain a provision making it clear that “mere compliance with the conditions of the Regulation is not sufficient to satisfy a fiduciary’s duty to prudently select and monitor a service provider.”
“In our opinion, the Regulation provides fiduciaries an important tool to satisfy their fiduciary duties because the Regulation puts an affirmative obligation on service providers to comply with the responsible plan fiduciary’s request for additional information,” the letter contended.
The lawmakers also asserted that the Regulation should impose an affirmative obligation on plan fiduciaries to provide disclosures by covered service providers to participants. “We also feel strongly that many of the disclosures (e.g., key fee-related disclosures) should be provided to participants automatically as part of their quarterly benefit statement, which are the disclosures participants are most likely to read,” the lawmakers wrote.
Signing the letter were Senate HELP Chairman Tom Harkin (D-Iowa), Senate Finance Committee Chairman Max Baucus (D-Montana), Senate Aging Committee Chairman Herb Kohl (D-Wisconsin), House Education and Labor Chairman George Miller (D-California), and House Ways and Means Chairman Sander Levin (D-Michigan). The letter is here.
One industry group argued in its comment letter that EBSA should change how it defines a covered service provider (see ASPPA Suggests Change to Providers Covered under Fee Disclosure Regs).