Speaking at the Plan Sponsor Council of America’s (PSCA’s) 66th Annual Conference, Borzi revealed she is a big supporter of defined benefit (DB) plans, but realizes the three-legged stool of retirement savings has changed, so the industry and the DOL must work together to create ways for employees to save and to educate them about the importance of saving. “I have no magic bullet for DC plans,” she said, adding that her focus has been broadening transparency and accountability, and reducing conflicts of interest.
What Borzi now calls the “conflict of interest rule”—the fiduciary definition proposal—will not be out in October because “we want to make sure it’s right,” she said. She explained that the regulators are not finished with prohibited transaction exemptions. “When released, it will be a complete package of rules and exemptions,” she added.
Borzi said the jury is out about the effectiveness of the 408(b)(2) service provider fee disclosures, because in particular, service providers are not following the rule to the letter. According to Borzi, the agency did not intend for providers to offer a master list of services and fees and have plan sponsors figure out which services they are using and paying for. Also, she said, it doesn’t serve the purpose of the regulations if the plan sponsor doesn’t have to understand the fee information it is provided because providers take care of everything for 404(a)(5) participant fee disclosures.
Borzi said the agency is looking at things they can do to clarify the rule—whether they can improve the regulations to meet its original goals. The agency has no timeline for such clarification. Borzi revealed the agency is working on a guide for plan sponsors about how to review the 408(b)(2) disclosures they receive. “We need to continue to educate plan sponsors about what their choices are and how to evaluate them,” she said.
When asked about target-date fund disclosures, Borzi confirmed the agency is working on such guidance. As with the conflict of interest rule, it is working together with the Securities and Exchange Commission (SEC).
The EBSA is also working with the Internal Revenue Service (IRS) and the Department of Health and Human Services (HHS) to issue companion guidance shortly about the effect of the Supreme Court Defense of Marriage Act (DOMA) ruling.