EBSA: Look for Fee Disclosure Regs in May 2010

Assistant Secretary of Labor Phyllis C. Borzi made the comment during an hour-long Webcast during which she answered questions about the department’s regulatory agenda and how EBSA plans to handle various retirement plan and other benefit program issues.

Also relating to the 408(b)(2) issue, Borzi asserted:

• that EBSA would keep in mind the need to coordinate various fee disclosure requirements as pointed out in a recent Government Accountability Office (GAO) report, promising to “incorporate those insights into our solution.” (see GAO Makes Suggestions to DoL on Fee Reporting).
  
• that regulators would provide “a (transition) period that will be adequate for effective and efficient implementation of the new rules.”

Borzi also handled several inquiries about EBSA’s efforts to revamp a Bush Administration-era rule governing the providing of retirement plan investment advice. She repeated earlier statements that the Obama Administration Labor Department felt the existing rule overshot the intentions of Congressional lawmakers.

“A number of concerns were raised (in public comment) regarding the scope of the original regulation,” Borzi said. “Our proposal will be much closer to the statutory exemption enacted by Congress. In particular, we are concerned that the proposed regulation had permitted conflicted advice in a way that Congress had not intended when it carefully crafted legislation on the question.”

She continued in answer to another questioner: “Accordingly, the regulated community should expect a proposal which more closely follows the intent of Congress in establishing a statutory exemption from the conflict of interest provisions of (Employee Retirement Income Security Act) ERISA.”

Other Highlights

Other highlights from the Web session with Borzi include:

• Regulators are still considering how well investors will be able to cope with the amount of information contained on an already-released model participant fee disclosure statement under 404(c), have presented it to a focus group to gauge understanding, have studied sample fund fact sheets, and have worked with other government agencies also trying to formulate similar public disclosure documents.

• EBSA is re-examining ERISA’s five-part test of fiduciary status.  “We are concerned that it allows advisers from whom plans expect impartial advice to evade fiduciary responsibility,” wrote Borzi. “The nature of investment advice services has changed since the regulation was issued in 1975 and we question whether it continues to accomplish its purpose in an effective manner.”

• EBSA continues pondering whether and how it should promulgate new rules governing target-date funds after holding public hearings on the issue earlier in the year with the Securities and Exchange Commission. Borzi commented: “We're working on checklists for fiduciaries and participants so that they can better understand what their choices are.”

• Regulators continue working on additional regulatory guidance for 403(b) sponsors - including on Form 5500 requirements - and have consulted with accounting industry representatives on transition issues related to the ERISA audit requirement.

• When it releases a request for information in January about its newly announced lifetime retirement income project (see DoL Set to Issue Annuity Project RFI), EBSA will particularly be looking for information on how best to deal with “both real and perceived impediments to the offering and selection of these (investment) products.”

• Regulators hope to complete by September 2010 a model pension benefit disclosure statement, and until then, plans are expected to act in good faith to implement a “reasonable interpretation of the (disclosure) statute” for DB plans.

• EBSA plans to release by next month a “bright line safe harbor for employers who remit (participant) contributions promptly.”