PSNC 2015: The Regulatory Environment

Lifetime income, service provider process changes and privacy of retirement plan information are just a few things for which plan sponsors need to prepare.

By Rebecca Moore | June 02, 2015
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Forty-four percent of attendees at the PLANSPONSOR National Conference in Chicago said they are somewhat challenged to keep their retirement plans compliant in a shifting regulatory landscape, and it is getting more difficult.

Indeed, rulemakers, lawmakers and the courts have been very busy in the past year or so. Marcia Wagner, the president and founder of Wagner Law Group, noted there is great change on the regulatory front, with a new proposal regarding the definition of fiduciary under the Employee Retirement Income Security Act (ERISA), rules for using qualified longevity annuities in retirement plans and rules for using annuities in target-date fund (TDF) offerings. “Lifetime income is the direction the Department of Labor (DOL) and Internal Revenue Service (IRS) are moving in,” she told conference attendees.

David Levine, principal of Groom Law Group Chartered, noted that the greatest stumbling block to adopting annuities in retirement plans is the question of their fiduciary risk. The DOL has provided safe harbor rules for selecting annuity products, but the rules say “appropriately” select and review. According to Levine, it has been on the DOL’s agenda for a while to clarify what “appropriately” means exactly. He thinks in the next year, the agency will move to clear that up. He told plan sponsors the important thing is to document selection and review processes.

The proposed fiduciary rule is also linked to retirement income in some ways, as it pulls plan rollovers into individual retirement accounts (IRAs) into the areas the DOL wants to protect. For plan sponsors, though, the biggest impact will be how services are rendered to the plan and participants, Levine said. Wagner added that plan sponsors will see an effect on the quality of help they receive, fee compression and new service provider contracts. Both Wagner and Levine agree the rule will change during the regulatory process, but the final result will still focus on transparency, and plan sponsors will be subject to the repapering of contracts.

NEXT: Judicial moves and data breaches.