GAO Recommends Tweaks to Pending EBSA Plan Regulations

By not better standardizing the disclosure from difference sources, the Government Accountability Office (GAO) pointed out, the sponsors may be left “with information that is not sufficient or comparable.”

The GAO called for EBSA to change proposed regulations to require that service providers’ written disclosures specifying that they are not undertaking to provide impartial investment advice be provided to the plan sponsor “in a consistent and prominent manner.”

Also, according to the GAO, EBSA should revise current standards which permit a service provider to highlight certain investment alternatives, such as proprietary funds, which may result in greater revenue to the service provider, in educational materials. Auditors said EBSA could require service providers to disclose that they may have a financial interest in the options highlighted or prohibit them from using proprietary funds as examples.

According to the GAO report, providers should also be required to disclose ”in a consistent and prominent manner” before at the point of sale, any financial interests the provider may have in products being offered for sale outside the plan and to disclose to participants whether they are acting as fiduciaries under the Employee Retirement Income Security Act (ERISA). Finally, the auditors suggested EBSA require participant disclosures that investment options pursued outside the plan often come with higher fees than those purchased within it.

The report said regulators in the Departments of Labor and Treasury agreed to consider the agency’s recommendations among other input from members of the public on pending EBSA regulations.

The report is at http://www.gao.gov/new.items/d11119.pdf.